Correlation Between GM and International Luxury
Can any of the company-specific risk be diversified away by investing in both GM and International Luxury 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 International Luxury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and International Luxury Products, you can compare the effects of market volatilities on GM and International Luxury 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 International Luxury. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and International Luxury.
Diversification Opportunities for GM and International Luxury
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and International is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and International Luxury Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Luxury 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 International Luxury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Luxury has no effect on the direction of GM i.e., GM and International Luxury go up and down completely randomly.
Pair Corralation between GM and International Luxury
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.47 times more return on investment than International Luxury. However, General Motors is 2.13 times less risky than International Luxury. It trades about 0.05 of its potential returns per unit of risk. International Luxury Products is currently generating about -0.04 per unit of risk. If you would invest 3,805 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,754 from holding General Motors or generate 46.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. International Luxury Products
Performance |
| Timeline |
| General Motors |
| International Luxury |
GM and International Luxury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and International Luxury
The main advantage of trading using opposite GM and International Luxury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, International Luxury 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 International Luxury will offset losses from the drop in International Luxury's long position.The idea behind General Motors and International Luxury Products 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.| International Luxury vs. Manaris Corp | International Luxury vs. Green Planet Bio | International Luxury vs. Continental Beverage Brands | International Luxury vs. Opus Magnum Ameris |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |