Correlation Between State Street and GM
Can any of the company-specific risk be diversified away by investing in both State Street and GM 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 State Street and GM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Aggregate and General Motors, you can compare the effects of market volatilities on State Street and GM 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 State Street with a short position of GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and GM.
Diversification Opportunities for State Street and GM
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between State and GM is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding State Street Aggregate and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and State Street 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 State Street Aggregate are associated (or correlated) with GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of State Street i.e., State Street and GM go up and down completely randomly.
Pair Corralation between State Street and GM
Assuming the 90 days horizon State Street Aggregate is expected to under-perform the GM. But the mutual fund apears to be less risky and, when comparing its historical volatility, State Street Aggregate is 4.97 times less risky than GM. The mutual fund trades about -0.01 of its potential returns per unit of risk. The General Motors is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,797 in General Motors on January 17, 2024 and sell it today you would earn a total of 472.00 from holding General Motors or generate 12.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Aggregate vs. General Motors
Performance |
| Timeline |
| State Street Aggregate |
| General Motors |
State Street and GM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and GM
The main advantage of trading using opposite State Street and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, GM 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 GM will offset losses from the drop in GM's long position.| State Street vs. State Street Target | State Street vs. Ssga International Stock | State Street vs. State Street Target | State Street vs. State Street Core |
| GM vs. Hycroft Mining Holding | GM vs. Exela Technologies | GM vs. Aquagold International | GM vs. Thrivent High Yield |
Check out your portfolio center.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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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