Correlation Between GM and Riverpark/wedgewood

Can any of the company-specific risk be diversified away by investing in both GM and Riverpark/wedgewood at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and Riverpark/wedgewood into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Riverparkwedgewood Fund Institutional, you can compare the effects of market volatilities on GM and Riverpark/wedgewood and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of Riverpark/wedgewood. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Riverpark/wedgewood.

Diversification Opportunities for GM and Riverpark/wedgewood

0.37

Correlation Coefficient

GM  Riverpark/wedgewood

Weak diversification

The 3 months correlation between GM and Riverpark/wedgewood is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Riverparkwedgewood Fund Instit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverpark/wedgewood and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with Riverpark/wedgewood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverpark/wedgewood has no effect on the direction of GM i.e., GM and Riverpark/wedgewood go up and down completely randomly.

Pair Corralation between GM and Riverpark/wedgewood

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.49 times more return on investment than Riverpark/wedgewood. However, General Motors is 2.03 times less risky than Riverpark/wedgewood. It trades about -0.09 of its potential returns per unit of risk. Riverparkwedgewood Fund Institutional is currently generating about -0.24 per unit of risk. If you would invest  5,341  in General Motors on October 7, 2024 and sell it today you would lose (164.00) from holding General Motors or give up 3.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Riverparkwedgewood Fund Instit

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Riverpark/wedgewood

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Riverparkwedgewood Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Riverpark/wedgewood is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Riverpark/wedgewood

The main advantage of trading using opposite GM and Riverpark/wedgewood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Riverpark/wedgewood can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Riverpark/wedgewood will offset losses from the drop in Riverpark/wedgewood's long position.

The idea behind General Motors and Riverparkwedgewood Fund Institutional pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.