Correlation Between GM and Lifestyle
Can any of the company-specific risk be diversified away by investing in both GM and Lifestyle 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 Lifestyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Lifestyle Ii Growth, you can compare the effects of market volatilities on GM and Lifestyle 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 Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Lifestyle.
Diversification Opportunities for GM and Lifestyle
Weak diversification
The 3 months correlation between GM and Lifestyle is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Lifestyle Ii Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifestyle Ii Growth 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 Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifestyle Ii Growth has no effect on the direction of GM i.e., GM and Lifestyle go up and down completely randomly.
Pair Corralation between GM and Lifestyle
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.95 times more return on investment than Lifestyle. However, GM is 2.95 times more volatile than Lifestyle Ii Growth. It trades about 0.14 of its potential returns per unit of risk. Lifestyle Ii Growth is currently generating about 0.1 per unit of risk. If you would invest 5,292 in General Motors on August 24, 2024 and sell it today you would earn a total of 276.00 from holding General Motors or generate 5.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
General Motors vs. Lifestyle Ii Growth
Performance |
Timeline |
General Motors |
Lifestyle Ii Growth |
GM and Lifestyle Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Lifestyle
The main advantage of trading using opposite GM and Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Lifestyle 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 Lifestyle will offset losses from the drop in Lifestyle's long position.The idea behind General Motors and Lifestyle Ii Growth 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.Lifestyle vs. Janus Global Technology | Lifestyle vs. Hennessy Technology Fund | Lifestyle vs. Global Technology Portfolio | Lifestyle vs. Fidelity Advisor Technology |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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