Correlation Between GM and Guggenheim Macro

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

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

Diversification Opportunities for GM and Guggenheim Macro

0.89

Correlation Coefficient

GM  Guggenheim Macro

Very poor diversification

The 3 months correlation between GM and Guggenheim is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Guggenheim Macro Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Macro Opp 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 Guggenheim Macro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Macro Opp has no effect on the direction of GM i.e., GM and Guggenheim Macro go up and down completely randomly.

Pair Corralation between GM and Guggenheim Macro

Allowing for the 90-day total investment horizon General Motors is expected to generate 8.97 times more return on investment than Guggenheim Macro. However, GM is 8.97 times more volatile than Guggenheim Macro Opportunities. It trades about 0.02 of its potential returns per unit of risk. Guggenheim Macro Opportunities is currently generating about 0.05 per unit of risk. If you would invest  3,723  in General Motors on January 19, 2024 and sell it today you would earn a total of  532.00  from holding General Motors or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

General Motors  vs.  Guggenheim Macro Opportunities

General Motors

Risk-Adjusted Performance

14 of 100

Good

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.

Guggenheim Macro Opp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim Macro Opportunities are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Guggenheim Macro 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 Guggenheim Macro

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

The idea behind General Motors and Guggenheim Macro Opportunities 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.