Correlation Between GM and US Treasury
Can any of the company-specific risk be diversified away by investing in both GM and US Treasury 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 US Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and US Treasury 20, you can compare the effects of market volatilities on GM and US Treasury 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 US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and US Treasury.
Diversification Opportunities for GM and US Treasury
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and UTWY is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and US Treasury 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 20 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 US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 20 has no effect on the direction of GM i.e., GM and US Treasury go up and down completely randomly.
Pair Corralation between GM and US Treasury
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.03 times more return on investment than US Treasury. However, GM is 3.03 times more volatile than US Treasury 20. It trades about -0.09 of its potential returns per unit of risk. US Treasury 20 is currently generating about -0.55 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 Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
General Motors vs. US Treasury 20
Performance |
Timeline |
General Motors |
US Treasury 20 |
GM and US Treasury Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and US Treasury
The main advantage of trading using opposite GM and US Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, US Treasury 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 US Treasury will offset losses from the drop in US Treasury's long position.The idea behind General Motors and US Treasury 20 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.US Treasury vs. Bondbloxx ETF Trust | US Treasury vs. Bondbloxx ETF Trust | US Treasury vs. Bondbloxx ETF Trust | US Treasury vs. Bondbloxx ETF Trust |
Check out your portfolio center.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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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