Correlation Between GM and BROOKDALE
Can any of the company-specific risk be diversified away by investing in both GM and BROOKDALE 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 BROOKDALE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and BROOKDALE SR LIVING, you can compare the effects of market volatilities on GM and BROOKDALE 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 BROOKDALE. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and BROOKDALE.
Diversification Opportunities for GM and BROOKDALE
Excellent diversification
The 3 months correlation between GM and BROOKDALE is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and BROOKDALE SR LIVING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BROOKDALE SR LIVING 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 BROOKDALE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BROOKDALE SR LIVING has no effect on the direction of GM i.e., GM and BROOKDALE go up and down completely randomly.
Pair Corralation between GM and BROOKDALE
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the BROOKDALE. In addition to that, GM is 1.12 times more volatile than BROOKDALE SR LIVING. It trades about -0.14 of its total potential returns per unit of risk. BROOKDALE SR LIVING is currently generating about 0.03 per unit of volatility. If you would invest 510.00 in BROOKDALE SR LIVING on September 12, 2024 and sell it today you would earn a total of 5.00 from holding BROOKDALE SR LIVING or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. BROOKDALE SR LIVING
Performance |
| Timeline |
| General Motors |
| BROOKDALE SR LIVING |
GM and BROOKDALE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and BROOKDALE
The main advantage of trading using opposite GM and BROOKDALE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, BROOKDALE 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 BROOKDALE will offset losses from the drop in BROOKDALE's long position.The idea behind General Motors and BROOKDALE SR LIVING 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.| BROOKDALE vs. FARO Technologies | BROOKDALE vs. DELTA AIR LINES | BROOKDALE vs. Altair Engineering | BROOKDALE vs. Digilife Technologies Limited |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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