Correlation Between GM and ProShares Trust

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

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

Diversification Opportunities for GM and ProShares Trust

0.29

Correlation Coefficient

GM  ProShares Trust

Modest diversification

The 3 months correlation between GM and ProShares is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust 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 ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of GM i.e., GM and ProShares Trust go up and down completely randomly.

Pair Corralation between GM and ProShares Trust

If you would invest  150,000  in ProShares Trust on September 16, 2024 and sell it today you would earn a total of  0.00  from holding ProShares Trust or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

General Motors  vs.  ProShares Trust

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) 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.

ProShares Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, ProShares Trust 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 ProShares Trust

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

The idea behind General Motors and ProShares Trust 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.