Correlation Between GM and Fidelity Total

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Can any of the company-specific risk be diversified away by investing in both GM and Fidelity Total 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 Fidelity Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Fidelity Total Market, you can compare the effects of market volatilities on GM and Fidelity Total 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 Fidelity Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fidelity Total.

Diversification Opportunities for GM and Fidelity Total

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between GM and Fidelity is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fidelity Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Total Market 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 Fidelity Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Total Market has no effect on the direction of GM i.e., GM and Fidelity Total go up and down completely randomly.

Pair Corralation between GM and Fidelity Total

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Fidelity Total. In addition to that, GM is 1.62 times more volatile than Fidelity Total Market. It trades about -0.22 of its total potential returns per unit of risk. Fidelity Total Market is currently generating about -0.33 per unit of volatility. If you would invest  1,479  in Fidelity Total Market on June 26, 2022 and sell it today you would lose (158.00)  from holding Fidelity Total Market or give up 10.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Fidelity Total Market

 Performance (%) 
       Timeline  
General Motors 
GM Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady primary indicators, GM is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

GM Price Channel

Fidelity Total Market 
Fidelity Performance
0 of 100
Over the last 90 days Fidelity Total Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Total is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Price Channel

GM and Fidelity Total Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Fidelity Total

The main advantage of trading using opposite GM and Fidelity Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Fidelity Total 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 Fidelity Total will offset losses from the drop in Fidelity Total's long position.
GM vs. Industrias Bachoco SA
The idea behind General Motors and Fidelity Total Market 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.
Fidelity Total vs. Caterpillar
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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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