Correlation Between GM and Lsv Small
Can any of the company-specific risk be diversified away by investing in both GM and Lsv Small 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 Lsv Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Lsv Small Cap, you can compare the effects of market volatilities on GM and Lsv Small 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 Lsv Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Lsv Small.
Diversification Opportunities for GM and Lsv Small
Very poor diversification
The 3 months correlation between GM and Lsv is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Lsv Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lsv Small Cap 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 Lsv Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lsv Small Cap has no effect on the direction of GM i.e., GM and Lsv Small go up and down completely randomly.
Pair Corralation between GM and Lsv Small
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.78 times more return on investment than Lsv Small. However, GM is 1.78 times more volatile than Lsv Small Cap. It trades about 0.16 of its potential returns per unit of risk. Lsv Small Cap is currently generating about 0.25 per unit of risk. If you would invest 5,096 in General Motors on September 2, 2024 and sell it today you would earn a total of 463.00 from holding General Motors or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Lsv Small Cap
Performance |
| Timeline |
| General Motors |
| Lsv Small Cap |
GM and Lsv Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Lsv Small
The main advantage of trading using opposite GM and Lsv Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Lsv Small 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 Lsv Small will offset losses from the drop in Lsv Small's long position.The idea behind General Motors and Lsv Small Cap 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.| Lsv Small vs. Lsv Global Managed | Lsv Small vs. Lsv Global Value | Lsv Small vs. Lsv Value Equity | Lsv Small vs. Lsv Managed Volatility |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |