Correlation Between GM and LB Investment
Can any of the company-specific risk be diversified away by investing in both GM and LB Investment 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 LB Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and LB Investment, you can compare the effects of market volatilities on GM and LB Investment 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 LB Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and LB Investment.
Diversification Opportunities for GM and LB Investment
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and 309960 is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and LB Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Investment 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 LB Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LB Investment has no effect on the direction of GM i.e., GM and LB Investment go up and down completely randomly.
Pair Corralation between GM and LB Investment
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.05 times more return on investment than LB Investment. However, GM is 3.05 times more volatile than LB Investment. It trades about 0.17 of its potential returns per unit of risk. LB Investment is currently generating about -0.2 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. LB Investment
Performance |
| Timeline |
| General Motors |
| LB Investment |
GM and LB Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and LB Investment
The main advantage of trading using opposite GM and LB Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, LB Investment 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 LB Investment will offset losses from the drop in LB Investment's long position.The idea behind General Motors and LB Investment 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.| LB Investment vs. iNtRON Biotechnology | LB Investment vs. BGF Retail Co | LB Investment vs. Daishin Information Communications | LB Investment vs. Shinsegae Information Communication |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |