Correlation Between GM and Lagardere
Can any of the company-specific risk be diversified away by investing in both GM and Lagardere 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 Lagardere into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Lagardere SA, you can compare the effects of market volatilities on GM and Lagardere 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 Lagardere. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Lagardere.
Diversification Opportunities for GM and Lagardere
Excellent diversification
The 3 months correlation between GM and Lagardere is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Lagardere SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lagardere SA 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 Lagardere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lagardere SA has no effect on the direction of GM i.e., GM and Lagardere go up and down completely randomly.
Pair Corralation between GM and Lagardere
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.34 times more return on investment than Lagardere. However, GM is 1.34 times more volatile than Lagardere SA. It trades about 0.06 of its potential returns per unit of risk. Lagardere SA is currently generating about 0.03 per unit of risk. If you would invest 3,313 in General Motors on September 13, 2024 and sell it today you would earn a total of 1,961 from holding General Motors or generate 59.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 67.0% |
| Values | Daily Returns |
General Motors vs. Lagardere SA
Performance |
| Timeline |
| General Motors |
| Lagardere SA |
GM and Lagardere Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Lagardere
The main advantage of trading using opposite GM and Lagardere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Lagardere 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 Lagardere will offset losses from the drop in Lagardere's long position.The idea behind General Motors and Lagardere SA 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.| Lagardere vs. Todos Medical | Lagardere vs. Cardinal Health | Lagardere vs. Sapiens International | Lagardere vs. SmartStop Self Storage |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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