Correlation Between GM and Wasatch Strategic

Can any of the company-specific risk be diversified away by investing in both GM and Wasatch 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 Wasatch 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 Wasatch Strategic Income, you can compare the effects of market volatilities on GM and Wasatch 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 Wasatch Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Wasatch Strategic.

Diversification Opportunities for GM and Wasatch Strategic

-0.5

Correlation Coefficient

GM  Wasatch Strategic

Very good diversification

The 3 months correlation between GM and Wasatch is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Wasatch Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Strategic Income 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 Wasatch Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Strategic Income has no effect on the direction of GM i.e., GM and Wasatch Strategic go up and down completely randomly.

Pair Corralation between GM and Wasatch Strategic

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.64 times more return on investment than Wasatch Strategic. However, GM is 2.64 times more volatile than Wasatch Strategic Income. It trades about 0.11 of its potential returns per unit of risk. Wasatch Strategic Income is currently generating about 0.07 per unit of risk. If you would invest  3,331  in General Motors on September 5, 2024 and sell it today you would earn a total of  2,035  from holding General Motors or generate 61.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Wasatch 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.

Wasatch Strategic Income

Risk-Adjusted Performance

2 of 100

Weak

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

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

The idea behind General Motors and Wasatch 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.