Correlation Between GM and Latch
Can any of the company-specific risk be diversified away by investing in both GM and Latch 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 Latch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Latch Inc, you can compare the effects of market volatilities on GM and Latch 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 Latch. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Latch.
Diversification Opportunities for GM and Latch
Poor diversification
The 3 months correlation between GM and Latch is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Latch Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latch Inc 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 Latch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latch Inc has no effect on the direction of GM i.e., GM and Latch go up and down completely randomly.
Pair Corralation between GM and Latch
Allowing for the 90-day total investment horizon GM is expected to generate 18.97 times less return on investment than Latch. But when comparing it to its historical volatility, General Motors is 10.03 times less risky than Latch. It trades about 0.07 of its potential returns per unit of risk. Latch Inc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 13.00 in Latch Inc on August 31, 2024 and sell it today you would earn a total of 4.00 from holding Latch Inc or generate 30.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 8.29% |
| Values | Daily Returns |
General Motors vs. Latch Inc
Performance |
| Timeline |
| General Motors |
| Latch Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Latch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Latch
The main advantage of trading using opposite GM and Latch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Latch 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 Latch will offset losses from the drop in Latch's long position.The idea behind General Motors and Latch Inc 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.| Latch vs. Albertsons Companies | Latch vs. Barrick Gold Corp | Latch vs. NioCorp Developments Ltd | Latch vs. Mangazeya 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |