Correlation Between GM and ETC 6

Can any of the company-specific risk be diversified away by investing in both GM and ETC 6 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 ETC 6 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and ETC 6 Meridian, you can compare the effects of market volatilities on GM and ETC 6 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 ETC 6. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and ETC 6.

Diversification Opportunities for GM and ETC 6

-0.67

Correlation Coefficient

GM  ETC 6

Excellent diversification

The 3 months correlation between GM and ETC is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and ETC 6 Meridian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETC 6 Meridian 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 ETC 6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETC 6 Meridian has no effect on the direction of GM i.e., GM and ETC 6 go up and down completely randomly.

Pair Corralation between GM and ETC 6

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the ETC 6. In addition to that, GM is 3.74 times more volatile than ETC 6 Meridian. It trades about -0.02 of its total potential returns per unit of risk. ETC 6 Meridian is currently generating about 0.13 per unit of volatility. If you would invest  3,683  in ETC 6 Meridian on December 25, 2024 and sell it today you would earn a total of  197.00  from holding ETC 6 Meridian or generate 5.35% return on investment over 90 days.

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

General Motors  vs.  ETC 6 Meridian

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

ETC 6 Meridian

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ETC 6 Meridian are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, ETC 6 is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with GM and ETC 6

The main advantage of trading using opposite GM and ETC 6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, ETC 6 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 ETC 6 will offset losses from the drop in ETC 6's long position.

The idea behind General Motors and ETC 6 Meridian 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.