Correlation Between GM and IShares MSCI

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Can any of the company-specific risk be diversified away by investing in both GM and IShares MSCI 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 IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and iShares MSCI AC, you can compare the effects of market volatilities on GM and IShares MSCI 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and IShares MSCI.

Diversification Opportunities for GM and IShares MSCI

GMISharesDiversified AwayGMISharesDiversified Away100%
0.1
  Correlation Coefficient

Average diversification

The 3 months correlation between GM and IShares is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and iShares MSCI AC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI AC 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI AC has no effect on the direction of GM i.e., GM and IShares MSCI go up and down completely randomly.

Pair Corralation between GM and IShares MSCI

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.73 times more return on investment than IShares MSCI. However, GM is 1.73 times more volatile than iShares MSCI AC. It trades about 0.08 of its potential returns per unit of risk. iShares MSCI AC is currently generating about 0.13 per unit of risk. If you would invest  4,741  in General Motors on September 17, 2024 and sell it today you would earn a total of  512.00  from holding General Motors or generate 10.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  iShares MSCI AC

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 051015202530
JavaScript chart by amCharts 3.21.15GM IFFF
       Timeline  
General Motors 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
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 may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec45505560
iShares MSCI AC 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI AC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec4748495051525354

GM and IShares MSCI Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.4-5.54-3.69-1.830.03251.953.95.857.8 0.050.100.150.20
JavaScript chart by amCharts 3.21.15GM IFFF
       Returns  

Pair Trading with GM and IShares MSCI

The main advantage of trading using opposite GM and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, IShares MSCI 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.
The idea behind General Motors and iShares MSCI AC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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