Correlation Between GM and Legacy Education
Can any of the company-specific risk be diversified away by investing in both GM and Legacy Education 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 Legacy Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Legacy Education, you can compare the effects of market volatilities on GM and Legacy Education 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 Legacy Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Legacy Education.
Diversification Opportunities for GM and Legacy Education
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Legacy is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Legacy Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Education 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 Legacy Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Education has no effect on the direction of GM i.e., GM and Legacy Education go up and down completely randomly.
Pair Corralation between GM and Legacy Education
Allowing for the 90-day total investment horizon GM is expected to generate 13.03 times less return on investment than Legacy Education. But when comparing it to its historical volatility, General Motors is 2.51 times less risky than Legacy Education. It trades about 0.03 of its potential returns per unit of risk. Legacy Education is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 402.00 in Legacy Education on November 19, 2024 and sell it today you would earn a total of 462.00 from holding Legacy Education or generate 114.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 19.8% |
| Values | Daily Returns |
General Motors vs. Legacy Education
Performance |
| Timeline |
| General Motors |
| Legacy Education |
GM and Legacy Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Legacy Education
The main advantage of trading using opposite GM and Legacy Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Legacy Education 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 Legacy Education will offset losses from the drop in Legacy Education's long position.The idea behind General Motors and Legacy Education 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.| Legacy Education vs. Willamette Valley Vineyards | Legacy Education vs. Fomento Economico Mexicano | Legacy Education vs. The Coca Cola | Legacy Education vs. SNDL Inc |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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