Correlation Between GM and LOREAL ADR
Can any of the company-specific risk be diversified away by investing in both GM and LOREAL ADR 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 LOREAL ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and LOREAL ADR 15EO, you can compare the effects of market volatilities on GM and LOREAL ADR 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 LOREAL ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and LOREAL ADR.
Diversification Opportunities for GM and LOREAL ADR
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and LOREAL is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and LOREAL ADR 15EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOREAL ADR 15EO 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 LOREAL ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOREAL ADR 15EO has no effect on the direction of GM i.e., GM and LOREAL ADR go up and down completely randomly.
Pair Corralation between GM and LOREAL ADR
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.03 times more return on investment than LOREAL ADR. However, GM is 1.03 times more volatile than LOREAL ADR 15EO. It trades about 0.07 of its potential returns per unit of risk. LOREAL ADR 15EO is currently generating about -0.03 per unit of risk. If you would invest 3,503 in General Motors on November 9, 2024 and sell it today you would earn a total of 1,290 from holding General Motors or generate 36.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.52% |
| Values | Daily Returns |
General Motors vs. LOREAL ADR 15EO
Performance |
| Timeline |
| General Motors |
| LOREAL ADR 15EO |
GM and LOREAL ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and LOREAL ADR
The main advantage of trading using opposite GM and LOREAL ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, LOREAL ADR 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 LOREAL ADR will offset losses from the drop in LOREAL ADR's long position.The idea behind General Motors and LOREAL ADR 15EO 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.| LOREAL ADR vs. Zoom Video Communications | LOREAL ADR vs. CITIC Telecom International | LOREAL ADR vs. CVW CLEANTECH INC | LOREAL ADR vs. Harmony Gold Mining |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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