Correlation Between GM and CI Canada
Can any of the company-specific risk be diversified away by investing in both GM and CI Canada 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 Canada 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 Canada Quality, you can compare the effects of market volatilities on GM and CI Canada 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 Canada. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and CI Canada.
Diversification Opportunities for GM and CI Canada
Good diversification
The 3 months correlation between GM and DGRC is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CI Canada Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Canada Quality 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 Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Canada Quality has no effect on the direction of GM i.e., GM and CI Canada go up and down completely randomly.
Pair Corralation between GM and CI Canada
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the CI Canada. In addition to that, GM is 1.63 times more volatile than CI Canada Quality. It trades about -0.1 of its total potential returns per unit of risk. CI Canada Quality is currently generating about -0.09 per unit of volatility. If you would invest 3,912 in CI Canada Quality on January 5, 2025 and sell it today you would lose (141.00) from holding CI Canada Quality or give up 3.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. CI Canada Quality
Performance |
| Timeline |
| General Motors |
| CI Canada Quality |
GM and CI Canada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and CI Canada
The main advantage of trading using opposite GM and CI Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, CI Canada 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 Canada will offset losses from the drop in CI Canada's long position.The idea behind General Motors and CI Canada Quality 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 Canada vs. iShares Core MSCI | CI Canada vs. SPDR Portfolio Emerging | CI Canada vs. SPDR Portfolio SP | CI Canada vs. iShares Canadian Short |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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