Correlation Between GM and Equitable
Can any of the company-specific risk be diversified away by investing in both GM and Equitable 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 Equitable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Equitable Group, you can compare the effects of market volatilities on GM and Equitable 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 Equitable. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Equitable.
Diversification Opportunities for GM and Equitable
Modest diversification
The 3 months correlation between GM and Equitable is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Equitable Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equitable Group 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 Equitable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equitable Group has no effect on the direction of GM i.e., GM and Equitable go up and down completely randomly.
Pair Corralation between GM and Equitable
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Equitable. In addition to that, GM is 1.92 times more volatile than Equitable Group. It trades about -0.13 of its total potential returns per unit of risk. Equitable Group is currently generating about 0.02 per unit of volatility. If you would invest 10,607 in Equitable Group on November 8, 2024 and sell it today you would earn a total of 52.00 from holding Equitable Group or generate 0.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
General Motors vs. Equitable Group
Performance |
| Timeline |
| General Motors |
| Equitable Group |
GM and Equitable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Equitable
The main advantage of trading using opposite GM and Equitable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Equitable 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 Equitable will offset losses from the drop in Equitable's long position.The idea behind General Motors and Equitable Group 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.| Equitable vs. goeasy | Equitable vs. Canadian Western Bank | Equitable vs. TFI International | Equitable vs. Intact Financial |
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 Stocks Directory module to find actively traded stocks across global markets.
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