Correlation Between GM and Blackrock Alternative

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

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

Diversification Opportunities for GM and Blackrock Alternative

-0.03

Correlation Coefficient

GM  Blackrock Alternative

Good diversification

The 3 months correlation between GM and Blackrock is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Blackrock Alternative Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Alternative 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 Blackrock Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Alternative has no effect on the direction of GM i.e., GM and Blackrock Alternative go up and down completely randomly.

Pair Corralation between GM and Blackrock Alternative

Allowing for the 90-day total investment horizon General Motors is expected to generate 9.82 times more return on investment than Blackrock Alternative. However, GM is 9.82 times more volatile than Blackrock Alternative Capital. It trades about 0.19 of its potential returns per unit of risk. Blackrock Alternative Capital is currently generating about 0.09 per unit of risk. If you would invest  4,475  in General Motors on August 15, 2024 and sell it today you would earn a total of  1,266  from holding General Motors or generate 28.29% return on investment over 90 days.

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

General Motors  vs.  Blackrock Alternative Capital

General Motors

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 14 (%) 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.

Blackrock Alternative

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Alternative Capital are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Blackrock Alternative 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 Blackrock Alternative

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

The idea behind General Motors and Blackrock Alternative Capital 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.