Correlation Between GM and Robinson Tax
Can any of the company-specific risk be diversified away by investing in both GM and Robinson Tax 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 Robinson Tax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Robinson Tax Advantaged, you can compare the effects of market volatilities on GM and Robinson Tax 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 Robinson Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Robinson Tax.
Diversification Opportunities for GM and Robinson Tax
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Robinson is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Robinson Tax Advantaged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Robinson Tax Advantaged 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 Robinson Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Robinson Tax Advantaged has no effect on the direction of GM i.e., GM and Robinson Tax go up and down completely randomly.
Pair Corralation between GM and Robinson Tax
Allowing for the 90-day total investment horizon General Motors is expected to generate 5.94 times more return on investment than Robinson Tax. However, GM is 5.94 times more volatile than Robinson Tax Advantaged. It trades about 0.24 of its potential returns per unit of risk. Robinson Tax Advantaged is currently generating about 0.11 per unit of risk. If you would invest 3,506 in General Motors on January 25, 2024 and sell it today you would earn a total of 1,004 from holding General Motors or generate 28.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Robinson Tax Advantaged
Performance |
| Timeline |
| General Motors |
| Robinson Tax Advantaged |
GM and Robinson Tax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Robinson Tax
The main advantage of trading using opposite GM and Robinson Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Robinson Tax 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 Robinson Tax will offset losses from the drop in Robinson Tax's long position.The idea behind General Motors and Robinson Tax Advantaged 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.| Robinson Tax vs. Robinson Tax Advantaged | Robinson Tax vs. Robinson Tax Advantaged | Robinson Tax vs. Robinson Opportunistic Income | Robinson Tax vs. Robinson Opportunistic Income |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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