Correlation Between GM and CCL Industries
Can any of the company-specific risk be diversified away by investing in both GM and CCL Industries 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 CCL Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and CCL Industries, you can compare the effects of market volatilities on GM and CCL Industries 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 CCL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and CCL Industries.
Diversification Opportunities for GM and CCL Industries
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and CCL is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CCL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCL Industries 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 CCL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCL Industries has no effect on the direction of GM i.e., GM and CCL Industries go up and down completely randomly.
Pair Corralation between GM and CCL Industries
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.39 times more return on investment than CCL Industries. However, GM is 1.39 times more volatile than CCL Industries. It trades about 0.28 of its potential returns per unit of risk. CCL Industries is currently generating about -0.22 per unit of risk. If you would invest 5,207 in General Motors on August 26, 2024 and sell it today you would earn a total of 646.00 from holding General Motors or generate 12.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. CCL Industries
Performance |
| Timeline |
| General Motors |
| CCL Industries |
GM and CCL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and CCL Industries
The main advantage of trading using opposite GM and CCL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, CCL Industries 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 CCL Industries will offset losses from the drop in CCL Industries' long position.The idea behind General Motors and CCL Industries 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.| CCL Industries vs. Myers Industries | CCL Industries vs. Silgan Holdings | CCL Industries vs. Pactiv Evergreen | CCL Industries vs. Reynolds Consumer Products |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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