Correlation Between GM and London Security
Can any of the company-specific risk be diversified away by investing in both GM and London Security 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 London Security into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and London Security Plc, you can compare the effects of market volatilities on GM and London Security 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 London Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and London Security.
Diversification Opportunities for GM and London Security
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and London is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security Plc 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 London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of GM i.e., GM and London Security go up and down completely randomly.
Pair Corralation between GM and London Security
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.75 times more return on investment than London Security. However, GM is 1.75 times more volatile than London Security Plc. It trades about 0.08 of its potential returns per unit of risk. London Security Plc is currently generating about 0.06 per unit of risk. If you would invest 4,551 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,008 from holding General Motors or generate 22.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 96.92% |
| Values | Daily Returns |
General Motors vs. London Security Plc
Performance |
| Timeline |
| General Motors |
| London Security Plc |
GM and London Security Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and London Security
The main advantage of trading using opposite GM and London Security positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, London Security 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 London Security will offset losses from the drop in London Security's long position.The idea behind General Motors and London Security Plc 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.| London Security vs. Samsung Electronics Co | London Security vs. Samsung Electronics Co | London Security vs. Hyundai Motor | London Security vs. Toyota Motor Corp |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |