Correlation Between GM and Columbia Large
Can any of the company-specific risk be diversified away by investing in both GM and Columbia Large 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 Large 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 Large Cap, you can compare the effects of market volatilities on GM and Columbia Large 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 Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Columbia Large.
Diversification Opportunities for GM and Columbia Large
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Columbia is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Columbia Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Large Cap 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 Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Large Cap has no effect on the direction of GM i.e., GM and Columbia Large go up and down completely randomly.
Pair Corralation between GM and Columbia Large
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Columbia Large. In addition to that, GM is 6.64 times more volatile than Columbia Large Cap. It trades about -0.14 of its total potential returns per unit of risk. Columbia Large Cap is currently generating about -0.1 per unit of volatility. If you would invest 1,011 in Columbia Large Cap on September 13, 2024 and sell it today you would lose (9.00) from holding Columbia Large Cap or give up 0.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Columbia Large Cap
Performance |
| Timeline |
| General Motors |
| Columbia Large Cap |
GM and Columbia Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Columbia Large
The main advantage of trading using opposite GM and Columbia Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Columbia Large 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 Large will offset losses from the drop in Columbia Large's long position.The idea behind General Motors and Columbia Large Cap 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 Large vs. Qs Growth Fund | Columbia Large vs. Rbb Fund | Columbia Large vs. Nasdaq 100 Index Fund | Columbia Large vs. Commonwealth Global Fund |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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