Correlation Between GM and Cullen Enhanced
Can any of the company-specific risk be diversified away by investing in both GM and Cullen Enhanced 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 Cullen Enhanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Cullen Enhanced Equity, you can compare the effects of market volatilities on GM and Cullen Enhanced 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 Cullen Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Cullen Enhanced.
Diversification Opportunities for GM and Cullen Enhanced
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Cullen is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Cullen Enhanced Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen Enhanced Equity 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 Cullen Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen Enhanced Equity has no effect on the direction of GM i.e., GM and Cullen Enhanced go up and down completely randomly.
Pair Corralation between GM and Cullen Enhanced
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.19 times more return on investment than Cullen Enhanced. However, GM is 3.19 times more volatile than Cullen Enhanced Equity. It trades about 0.14 of its potential returns per unit of risk. Cullen Enhanced Equity is currently generating about 0.11 per unit of risk. If you would invest 3,135 in General Motors on August 26, 2024 and sell it today you would earn a total of 2,718 from holding General Motors or generate 86.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Cullen Enhanced Equity
Performance |
| Timeline |
| General Motors |
| Cullen Enhanced Equity |
GM and Cullen Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Cullen Enhanced
The main advantage of trading using opposite GM and Cullen Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Cullen Enhanced 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 Cullen Enhanced will offset losses from the drop in Cullen Enhanced's long position.The idea behind General Motors and Cullen Enhanced Equity 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.| Cullen Enhanced vs. Cullen Small Cap | Cullen Enhanced vs. Cullen Small Cap | Cullen Enhanced vs. Cullen Small Cap | Cullen Enhanced vs. Cullen Value Fund |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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