Correlation Between GM and Conservative Allocation

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

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

Diversification Opportunities for GM and Conservative Allocation

0.81

Correlation Coefficient

GM  Conservative Allocation

Very poor diversification

The 3 months correlation between GM and Conservative is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Conservative Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conservative Allocation 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 Conservative Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conservative Allocation has no effect on the direction of GM i.e., GM and Conservative Allocation go up and down completely randomly.

Pair Corralation between GM and Conservative Allocation

Allowing for the 90-day total investment horizon General Motors is expected to generate 10.11 times more return on investment than Conservative Allocation. However, GM is 10.11 times more volatile than Conservative Allocation Fund. It trades about 0.12 of its potential returns per unit of risk. Conservative Allocation Fund is currently generating about 0.25 per unit of risk. If you would invest  4,532  in General Motors on May 6, 2025 and sell it today you would earn a total of  770.50  from holding General Motors or generate 17.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

General Motors  vs.  Conservative Allocation Fund

General Motors

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Conservative Allocation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Conservative Allocation Fund are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Conservative Allocation 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 Conservative Allocation

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

The idea behind General Motors and Conservative Allocation Fund 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.