Correlation Between GM and Loomis AB
Can any of the company-specific risk be diversified away by investing in both GM and Loomis AB 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 Loomis AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Loomis AB, you can compare the effects of market volatilities on GM and Loomis AB 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 Loomis AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Loomis AB.
Diversification Opportunities for GM and Loomis AB
Very weak diversification
The 3 months correlation between GM and Loomis is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Loomis AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loomis AB 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 Loomis AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loomis AB has no effect on the direction of GM i.e., GM and Loomis AB go up and down completely randomly.
Pair Corralation between GM and Loomis AB
Allowing for the 90-day total investment horizon GM is expected to generate 1.04 times less return on investment than Loomis AB. But when comparing it to its historical volatility, General Motors is 1.29 times less risky than Loomis AB. It trades about 0.06 of its potential returns per unit of risk. Loomis AB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,430 in Loomis AB on September 14, 2024 and sell it today you would earn a total of 768.00 from holding Loomis AB or generate 31.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 61.13% |
| Values | Daily Returns |
General Motors vs. Loomis AB
Performance |
| Timeline |
| General Motors |
| Loomis AB |
GM and Loomis AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Loomis AB
The main advantage of trading using opposite GM and Loomis AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Loomis AB 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 Loomis AB will offset losses from the drop in Loomis AB's long position.The idea behind General Motors and Loomis AB 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.| Loomis AB vs. Allegion PLC | Loomis AB vs. MSA Safety | Loomis AB vs. Resideo Technologies | Loomis AB vs. NL Industries |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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