Correlation Between GM and Real Luck
Can any of the company-specific risk be diversified away by investing in both GM and Real Luck 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 Real Luck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Real Luck Group, you can compare the effects of market volatilities on GM and Real Luck 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 Real Luck. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Real Luck.
Diversification Opportunities for GM and Real Luck
Significant diversification
The 3 months correlation between GM and Real is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Real Luck Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Luck Group 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 Real Luck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Luck Group has no effect on the direction of GM i.e., GM and Real Luck go up and down completely randomly.
Pair Corralation between GM and Real Luck
Allowing for the 90-day total investment horizon GM is expected to generate 48.77 times less return on investment than Real Luck. But when comparing it to its historical volatility, General Motors is 48.56 times less risky than Real Luck. It trades about 0.09 of its potential returns per unit of risk. Real Luck Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 0.50 in Real Luck Group on August 29, 2024 and sell it today you would earn a total of 6,600 from holding Real Luck Group or generate 1319900.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.52% |
| Values | Daily Returns |
General Motors vs. Real Luck Group
Performance |
| Timeline |
| General Motors |
| Real Luck Group |
GM and Real Luck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Real Luck
The main advantage of trading using opposite GM and Real Luck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Real Luck 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 Real Luck will offset losses from the drop in Real Luck's long position.The idea behind General Motors and Real Luck Group 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.| Real Luck vs. Bragg Gaming Group | Real Luck vs. Braille Energy Systems | Real Luck vs. Lite Access Technologies | Real Luck vs. ESE Entertainment |
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.
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