Correlation Between GM and Direxion
Can any of the company-specific risk be diversified away by investing in both GM and Direxion 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 Direxion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Direxion, you can compare the effects of market volatilities on GM and Direxion 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 Direxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Direxion.
Diversification Opportunities for GM and Direxion
Excellent diversification
The 3 months correlation between GM and Direxion is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion 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 Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of GM i.e., GM and Direxion go up and down completely randomly.
Pair Corralation between GM and Direxion
If you would invest 4,355 in General Motors on January 24, 2024 and sell it today you would earn a total of 155.00 from holding General Motors or generate 3.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
General Motors vs. Direxion
Performance |
| Timeline |
| General Motors |
| Direxion |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Direxion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Direxion
The main advantage of trading using opposite GM and Direxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Direxion 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 Direxion will offset losses from the drop in Direxion's long position.The idea behind General Motors and Direxion 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.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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Stocks Directory Find actively traded stocks across global markets | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |