Correlation Between GM and CI Lawrence
Can any of the company-specific risk be diversified away by investing in both GM and CI Lawrence 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 CI Lawrence into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and CI Lawrence Park, you can compare the effects of market volatilities on GM and CI Lawrence 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 CI Lawrence. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and CI Lawrence.
Diversification Opportunities for GM and CI Lawrence
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and CRED is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CI Lawrence Park in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Lawrence Park 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 CI Lawrence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Lawrence Park has no effect on the direction of GM i.e., GM and CI Lawrence go up and down completely randomly.
Pair Corralation between GM and CI Lawrence
Allowing for the 90-day total investment horizon General Motors is expected to generate 22.59 times more return on investment than CI Lawrence. However, GM is 22.59 times more volatile than CI Lawrence Park. It trades about 0.17 of its potential returns per unit of risk. CI Lawrence Park is currently generating about 0.51 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. CI Lawrence Park
Performance |
| Timeline |
| General Motors |
| CI Lawrence Park |
GM and CI Lawrence Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and CI Lawrence
The main advantage of trading using opposite GM and CI Lawrence positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, CI Lawrence 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 CI Lawrence will offset losses from the drop in CI Lawrence's long position.The idea behind General Motors and CI Lawrence Park 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.| CI Lawrence vs. Brompton Global Dividend | CI Lawrence vs. Global Healthcare Income | CI Lawrence vs. Tech Leaders Income | CI Lawrence vs. Brompton North American |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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