Correlation Between GM and LIFE SCIREIT
Can any of the company-specific risk be diversified away by investing in both GM and LIFE SCIREIT 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 LIFE SCIREIT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and LIFE SCIREIT PLC, you can compare the effects of market volatilities on GM and LIFE SCIREIT 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 LIFE SCIREIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and LIFE SCIREIT.
Diversification Opportunities for GM and LIFE SCIREIT
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and LIFE is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and LIFE SCIREIT PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFE SCIREIT PLC 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 LIFE SCIREIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFE SCIREIT PLC has no effect on the direction of GM i.e., GM and LIFE SCIREIT go up and down completely randomly.
Pair Corralation between GM and LIFE SCIREIT
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.6 times more return on investment than LIFE SCIREIT. However, General Motors is 1.66 times less risky than LIFE SCIREIT. It trades about 0.06 of its potential returns per unit of risk. LIFE SCIREIT PLC is currently generating about -0.03 per unit of risk. If you would invest 3,263 in General Motors on September 14, 2024 and sell it today you would earn a total of 1,997 from holding General Motors or generate 61.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.21% |
| Values | Daily Returns |
General Motors vs. LIFE SCIREIT PLC
Performance |
| Timeline |
| General Motors |
| LIFE SCIREIT PLC |
GM and LIFE SCIREIT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and LIFE SCIREIT
The main advantage of trading using opposite GM and LIFE SCIREIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, LIFE SCIREIT 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 LIFE SCIREIT will offset losses from the drop in LIFE SCIREIT's long position.The idea behind General Motors and LIFE SCIREIT PLC 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.| LIFE SCIREIT vs. Playtech plc | LIFE SCIREIT vs. Uber Technologies | LIFE SCIREIT vs. ORMAT TECHNOLOGIES | LIFE SCIREIT vs. AAC TECHNOLOGHLDGADR |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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