Correlation Between GM and Clearbridge Select
Can any of the company-specific risk be diversified away by investing in both GM and Clearbridge Select 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 Clearbridge Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Clearbridge Select Fund, you can compare the effects of market volatilities on GM and Clearbridge Select 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 Clearbridge Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Clearbridge Select.
Diversification Opportunities for GM and Clearbridge Select
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Clearbridge is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Clearbridge Select Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Select 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 Clearbridge Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Select has no effect on the direction of GM i.e., GM and Clearbridge Select go up and down completely randomly.
Pair Corralation between GM and Clearbridge Select
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.04 times more return on investment than Clearbridge Select. However, GM is 2.04 times more volatile than Clearbridge Select Fund. It trades about 0.05 of its potential returns per unit of risk. Clearbridge Select Fund is currently generating about 0.09 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 | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Clearbridge Select Fund
Performance |
| Timeline |
| General Motors |
| Clearbridge Select |
GM and Clearbridge Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Clearbridge Select
The main advantage of trading using opposite GM and Clearbridge Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Clearbridge Select 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 Clearbridge Select will offset losses from the drop in Clearbridge Select's long position.The idea behind General Motors and Clearbridge Select Fund 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.| Clearbridge Select vs. Salient Mlp Energy | Clearbridge Select vs. Dreyfus Natural Resources | Clearbridge Select vs. Oil Gas Ultrasector | Clearbridge Select vs. Firsthand Alternative Energy |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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