Correlation Between GM and Riverpark Strategic

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

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

Diversification Opportunities for GM and Riverpark Strategic

0.87

Correlation Coefficient

GM  Riverpark Strategic

Very poor diversification

The 3 months correlation between GM and Riverpark is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Riverpark Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverpark Strategic 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 Riverpark Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverpark Strategic has no effect on the direction of GM i.e., GM and Riverpark Strategic go up and down completely randomly.

Pair Corralation between GM and Riverpark Strategic

Allowing for the 90-day total investment horizon General Motors is expected to generate 19.66 times more return on investment than Riverpark Strategic. However, GM is 19.66 times more volatile than Riverpark Strategic Income. It trades about 0.09 of its potential returns per unit of risk. Riverpark Strategic Income is currently generating about 0.3 per unit of risk. If you would invest  3,550  in General Motors on September 14, 2024 and sell it today you would earn a total of  1,710  from holding General Motors or generate 48.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.6%
Values	Daily Returns

General Motors  vs.  Riverpark Strategic Income

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.

Riverpark Strategic

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Riverpark Strategic Income are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Riverpark Strategic 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 Riverpark Strategic

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

The idea behind General Motors and Riverpark Strategic Income 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.