Correlation Between GM and Societe LDC
Can any of the company-specific risk be diversified away by investing in both GM and Societe LDC 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 Societe LDC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Societe LDC SA, you can compare the effects of market volatilities on GM and Societe LDC 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 Societe LDC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Societe LDC.
Diversification Opportunities for GM and Societe LDC
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Societe is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Societe LDC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Societe LDC 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 Societe LDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Societe LDC SA has no effect on the direction of GM i.e., GM and Societe LDC go up and down completely randomly.
Pair Corralation between GM and Societe LDC
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.26 times more return on investment than Societe LDC. However, GM is 1.26 times more volatile than Societe LDC SA. It trades about 0.07 of its potential returns per unit of risk. Societe LDC SA is currently generating about 0.03 per unit of risk. If you would invest 3,617 in General Motors on September 2, 2024 and sell it today you would earn a total of 1,942 from holding General Motors or generate 53.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.89% |
| Values | Daily Returns |
General Motors vs. Societe LDC SA
Performance |
| Timeline |
| General Motors |
| Societe LDC SA |
GM and Societe LDC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Societe LDC
The main advantage of trading using opposite GM and Societe LDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Societe LDC 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 Societe LDC will offset losses from the drop in Societe LDC's long position.The idea behind General Motors and Societe LDC 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.| Societe LDC vs. Stef SA | Societe LDC vs. Bonduelle SCA | Societe LDC vs. Lisi SA | Societe LDC vs. Interparfums SA |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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