Correlation Between GM and Columbia Banking
Can any of the company-specific risk be diversified away by investing in both GM and Columbia Banking 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 Banking 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 Banking System, you can compare the effects of market volatilities on GM and Columbia Banking 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 Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Columbia Banking.
Diversification Opportunities for GM and Columbia Banking
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Columbia is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Columbia Banking System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Banking System 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 Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Banking System has no effect on the direction of GM i.e., GM and Columbia Banking go up and down completely randomly.
Pair Corralation between GM and Columbia Banking
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Columbia Banking. In addition to that, GM is 1.8 times more volatile than Columbia Banking System. It trades about -0.11 of its total potential returns per unit of risk. Columbia Banking System is currently generating about 0.12 per unit of volatility. If you would invest 2,701 in Columbia Banking System on November 1, 2024 and sell it today you would earn a total of 102.00 from holding Columbia Banking System or generate 3.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Columbia Banking System
Performance |
| Timeline |
| General Motors |
| Columbia Banking System |
GM and Columbia Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Columbia Banking
The main advantage of trading using opposite GM and Columbia Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Columbia Banking 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 Banking will offset losses from the drop in Columbia Banking's long position.The idea behind General Motors and Columbia Banking System 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 Banking vs. Glacier Bancorp | Columbia Banking vs. CVB Financial | Columbia Banking vs. First Financial Bankshares | Columbia Banking vs. First Interstate BancSystem |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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