Correlation Between GM and Dream Industrial
Can any of the company-specific risk be diversified away by investing in both GM and Dream Industrial 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 Dream Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Dream Industrial Real, you can compare the effects of market volatilities on GM and Dream Industrial 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 Dream Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Dream Industrial.
Diversification Opportunities for GM and Dream Industrial
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Dream is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Dream Industrial Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Industrial Real 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 Dream Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Industrial Real has no effect on the direction of GM i.e., GM and Dream Industrial go up and down completely randomly.
Pair Corralation between GM and Dream Industrial
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.24 times more return on investment than Dream Industrial. However, GM is 1.24 times more volatile than Dream Industrial Real. It trades about 0.04 of its potential returns per unit of risk. Dream Industrial Real is currently generating about -0.01 per unit of risk. If you would invest 3,436 in General Motors on December 10, 2024 and sell it today you would earn a total of 1,308 from holding General Motors or generate 38.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 84.44% |
| Values | Daily Returns |
General Motors vs. Dream Industrial Real
Performance |
| Timeline |
| General Motors |
| Dream Industrial Real |
GM and Dream Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Dream Industrial
The main advantage of trading using opposite GM and Dream Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Dream Industrial 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 Dream Industrial will offset losses from the drop in Dream Industrial's long position.The idea behind General Motors and Dream Industrial Real 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.| Dream Industrial vs. National Storage Affiliates | Dream Industrial vs. CubeSmart | Dream Industrial vs. Rexford Industrial Realty | Dream Industrial vs. Plymouth Industrial REIT |
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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