Correlation Between GM and Cushing Mlp

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

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

Diversification Opportunities for GM and Cushing Mlp

0.7

Correlation Coefficient

GM  Cushing Mlp

Poor diversification

The 3 months correlation between GM and Cushing is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and The Cushing Mlp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cushing Mlp 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 Cushing Mlp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cushing Mlp has no effect on the direction of GM i.e., GM and Cushing Mlp go up and down completely randomly.

Pair Corralation between GM and Cushing Mlp

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.48 times more return on investment than Cushing Mlp. However, GM is 1.48 times more volatile than The Cushing Mlp. It trades about 0.14 of its potential returns per unit of risk. The Cushing Mlp is currently generating about 0.03 per unit of risk. If you would invest  4,474  in General Motors on September 29, 2024 and sell it today you would earn a total of  954.00  from holding General Motors or generate 21.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  The Cushing Mlp

General Motors

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 11 (%) 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.

Cushing Mlp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Cushing Mlp are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Cushing Mlp 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 Cushing Mlp

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

The idea behind General Motors and The Cushing Mlp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.