Correlation Between GM and Columbia Limited
Can any of the company-specific risk be diversified away by investing in both GM and Columbia Limited 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 Columbia Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Columbia Limited Duration, you can compare the effects of market volatilities on GM and Columbia Limited 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 Columbia Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Columbia Limited.
Diversification Opportunities for GM and Columbia Limited
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Columbia is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Columbia Limited Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Limited Duration 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 Columbia Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Limited Duration has no effect on the direction of GM i.e., GM and Columbia Limited go up and down completely randomly.
Pair Corralation between GM and Columbia Limited
Allowing for the 90-day total investment horizon General Motors is expected to generate 10.47 times more return on investment than Columbia Limited. However, GM is 10.47 times more volatile than Columbia Limited Duration. It trades about 0.05 of its potential returns per unit of risk. Columbia Limited Duration is currently generating about 0.11 per unit of risk. If you would invest 3,778 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,781 from holding General Motors or generate 47.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
General Motors vs. Columbia Limited Duration
Performance |
| Timeline |
| General Motors |
| Columbia Limited Duration |
GM and Columbia Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Columbia Limited
The main advantage of trading using opposite GM and Columbia Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Columbia Limited 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 Columbia Limited will offset losses from the drop in Columbia Limited's long position.The idea behind General Motors and Columbia Limited Duration 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.| Columbia Limited vs. Columbia Porate Income | Columbia Limited vs. Columbia Ultra Short | Columbia Limited vs. Columbia Ultra Short | Columbia Limited vs. Columbia Treasury Index |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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