Correlation Between GM and Duluth Holdings
Can any of the company-specific risk be diversified away by investing in both GM and Duluth Holdings 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 Duluth Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Duluth Holdings, you can compare the effects of market volatilities on GM and Duluth Holdings 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 Duluth Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Duluth Holdings.
Diversification Opportunities for GM and Duluth Holdings
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Duluth is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Duluth Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duluth Holdings 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 Duluth Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duluth Holdings has no effect on the direction of GM i.e., GM and Duluth Holdings go up and down completely randomly.
Pair Corralation between GM and Duluth Holdings
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.74 times more return on investment than Duluth Holdings. However, General Motors is 1.35 times less risky than Duluth Holdings. It trades about 0.05 of its potential returns per unit of risk. Duluth Holdings is currently generating about -0.05 per unit of risk. If you would invest 3,276 in General Motors on December 6, 2024 and sell it today you would earn a total of 1,444 from holding General Motors or generate 44.08% 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. Duluth Holdings
Performance |
| Timeline |
| General Motors |
| Duluth Holdings |
GM and Duluth Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Duluth Holdings
The main advantage of trading using opposite GM and Duluth Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Duluth Holdings 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 Duluth Holdings will offset losses from the drop in Duluth Holdings' long position.The idea behind General Motors and Duluth Holdings 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.| Duluth Holdings vs. Zumiez Inc | Duluth Holdings vs. JJill Inc | Duluth Holdings vs. Shoe Carnival | Duluth Holdings vs. Cato Corporation |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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