Correlation Between GM and Ultrashort Mid

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

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

Diversification Opportunities for GM and Ultrashort Mid

-0.35

Correlation Coefficient

GM  Ultrashort Mid

Very good diversification

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

Pair Corralation between GM and Ultrashort Mid

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Ultrashort Mid. In addition to that, GM is 1.27 times more volatile than Ultrashort Mid Cap Profund. It trades about -0.06 of its total potential returns per unit of risk. Ultrashort Mid Cap Profund is currently generating about 0.08 per unit of volatility. If you would invest  2,534  in Ultrashort Mid Cap Profund on December 28, 2024 and sell it today you would earn a total of  247.00  from holding Ultrashort Mid Cap Profund or generate 9.75% 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.  Ultrashort Mid Cap Profund

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Ultrashort Mid Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrashort Mid Cap Profund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultrashort Mid may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and Ultrashort Mid

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

The idea behind General Motors and Ultrashort Mid Cap Profund 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.