Correlation Between GM and Stet Tax

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

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

Diversification Opportunities for GM and Stet Tax

-0.35

Correlation Coefficient

GM  Stet Tax

Very good diversification

The 3 months correlation between GM and Stet is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Stet Tax Advantaged Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stet Tax Advantaged 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 Stet Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stet Tax Advantaged has no effect on the direction of GM i.e., GM and Stet Tax go up and down completely randomly.

Pair Corralation between GM and Stet Tax

Allowing for the 90-day total investment horizon General Motors is expected to generate 10.25 times more return on investment than Stet Tax. However, GM is 10.25 times more volatile than Stet Tax Advantaged Income. It trades about 0.1 of its potential returns per unit of risk. Stet Tax Advantaged Income is currently generating about 0.02 per unit of risk. If you would invest  4,620  in General Motors on September 13, 2024 and sell it today you would earn a total of  654.00  from holding General Motors or generate 14.16% return on investment over 90 days.

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

General Motors  vs.  Stet Tax Advantaged Income

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.

Stet Tax Advantaged

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stet Tax Advantaged Income are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Stet Tax 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 Stet Tax

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

The idea behind General Motors and Stet Tax Advantaged Income 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.