Correlation Between GM and Dreyfus Municipalome

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

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

Diversification Opportunities for GM and Dreyfus Municipalome

0.34

Correlation Coefficient

GM  Dreyfus Municipalome

Weak diversification

The 3 months correlation between GM and Dreyfus is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Dreyfus Municipalome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Municipalome 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 Dreyfus Municipalome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Municipalome has no effect on the direction of GM i.e., GM and Dreyfus Municipalome go up and down completely randomly.

Pair Corralation between GM and Dreyfus Municipalome

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Dreyfus Municipalome. In addition to that, GM is 4.32 times more volatile than Dreyfus Municipalome. It trades about -0.1 of its total potential returns per unit of risk. Dreyfus Municipalome is currently generating about -0.08 per unit of volatility. If you would invest  786.00  in Dreyfus Municipalome on November 29, 2024 and sell it today you would lose (19.00) from holding Dreyfus Municipalome or give up 2.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

General Motors  vs.  Dreyfus Municipalome

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Dreyfus Municipalome

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dreyfus Municipalome has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Dreyfus Municipalome 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 Dreyfus Municipalome

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

The idea behind General Motors and Dreyfus Municipalome 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.