Correlation Between GM and Laurentian Bank
Can any of the company-specific risk be diversified away by investing in both GM and Laurentian Bank 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 Laurentian Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Laurentian Bank, you can compare the effects of market volatilities on GM and Laurentian Bank 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 Laurentian Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Laurentian Bank.
Diversification Opportunities for GM and Laurentian Bank
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Laurentian is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Laurentian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laurentian Bank 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 Laurentian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laurentian Bank has no effect on the direction of GM i.e., GM and Laurentian Bank go up and down completely randomly.
Pair Corralation between GM and Laurentian Bank
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.74 times more return on investment than Laurentian Bank. However, GM is 1.74 times more volatile than Laurentian Bank. It trades about 0.32 of its potential returns per unit of risk. Laurentian Bank is currently generating about 0.4 per unit of risk. If you would invest 5,273 in General Motors on August 27, 2024 and sell it today you would earn a total of 747.00 from holding General Motors or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Laurentian Bank
Performance |
| Timeline |
| General Motors |
| Laurentian Bank |
GM and Laurentian Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Laurentian Bank
The main advantage of trading using opposite GM and Laurentian Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Laurentian Bank 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 Laurentian Bank will offset losses from the drop in Laurentian Bank's long position.The idea behind General Motors and Laurentian Bank 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.| Laurentian Bank vs. Canadian Western Bank | Laurentian Bank vs. National Bank of | Laurentian Bank vs. Canadian Imperial Bank | Laurentian Bank vs. Great West Lifeco |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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