Correlation Between GM and Loomis Sayles
Can any of the company-specific risk be diversified away by investing in both GM and Loomis Sayles 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 Sayles 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 Sayles Small, you can compare the effects of market volatilities on GM and Loomis Sayles 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 Sayles. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Loomis Sayles.
Diversification Opportunities for GM and Loomis Sayles
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Loomis is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Loomis Sayles Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loomis Sayles Small 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 Sayles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loomis Sayles Small has no effect on the direction of GM i.e., GM and Loomis Sayles go up and down completely randomly.
Pair Corralation between GM and Loomis Sayles
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.18 times more return on investment than Loomis Sayles. However, GM is 1.18 times more volatile than Loomis Sayles Small. It trades about 0.28 of its potential returns per unit of risk. Loomis Sayles Small is currently generating about 0.22 per unit of risk. If you would invest 5,207 in General Motors on August 26, 2024 and sell it today you would earn a total of 646.00 from holding General Motors or generate 12.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Loomis Sayles Small
Performance |
| Timeline |
| General Motors |
| Loomis Sayles Small |
GM and Loomis Sayles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Loomis Sayles
The main advantage of trading using opposite GM and Loomis Sayles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Loomis Sayles 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 Sayles will offset losses from the drop in Loomis Sayles' long position.The idea behind General Motors and Loomis Sayles Small 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 Sayles vs. Loomis Sayles Small | Loomis Sayles vs. Ab International Value | Loomis Sayles vs. Clearbridge Small Cap | Loomis Sayles vs. Loomis Sayles Small |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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