Correlation Between GM and LODESTAR MIN
Can any of the company-specific risk be diversified away by investing in both GM and LODESTAR MIN 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 LODESTAR MIN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and LODESTAR MIN, you can compare the effects of market volatilities on GM and LODESTAR MIN 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 LODESTAR MIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and LODESTAR MIN.
Diversification Opportunities for GM and LODESTAR MIN
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and LODESTAR is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and LODESTAR MIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LODESTAR MIN 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 LODESTAR MIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LODESTAR MIN has no effect on the direction of GM i.e., GM and LODESTAR MIN go up and down completely randomly.
Pair Corralation between GM and LODESTAR MIN
Allowing for the 90-day total investment horizon GM is expected to generate 16.22 times less return on investment than LODESTAR MIN. But when comparing it to its historical volatility, General Motors is 31.46 times less risky than LODESTAR MIN. It trades about 0.11 of its potential returns per unit of risk. LODESTAR MIN is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 0.69 in LODESTAR MIN on September 4, 2024 and sell it today you would lose (0.25) from holding LODESTAR MIN or give up 36.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
General Motors vs. LODESTAR MIN
Performance |
| Timeline |
| General Motors |
| LODESTAR MIN |
GM and LODESTAR MIN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and LODESTAR MIN
The main advantage of trading using opposite GM and LODESTAR MIN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, LODESTAR MIN 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 LODESTAR MIN will offset losses from the drop in LODESTAR MIN's long position.The idea behind General Motors and LODESTAR MIN 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.| LODESTAR MIN vs. Lion Biotechnologies | LODESTAR MIN vs. Lifeway Foods | LODESTAR MIN vs. JJ SNACK FOODS | LODESTAR MIN vs. SCANSOURCE |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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