Correlation Between GM and Marks
Can any of the company-specific risk be diversified away by investing in both GM and Marks 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 Marks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Marks and Spencer, you can compare the effects of market volatilities on GM and Marks 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 Marks. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Marks.
Diversification Opportunities for GM and Marks
Weak diversification
The 3 months correlation between GM and Marks is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Marks and Spencer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marks and Spencer 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 Marks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marks and Spencer has no effect on the direction of GM i.e., GM and Marks go up and down completely randomly.
Pair Corralation between GM and Marks
Allowing for the 90-day total investment horizon GM is expected to generate 2.51 times less return on investment than Marks. But when comparing it to its historical volatility, General Motors is 1.24 times less risky than Marks. It trades about 0.06 of its potential returns per unit of risk. Marks and Spencer is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 130.00 in Marks and Spencer on September 13, 2024 and sell it today you would earn a total of 345.00 from holding Marks and Spencer or generate 265.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.02% |
| Values | Daily Returns |
General Motors vs. Marks and Spencer
Performance |
| Timeline |
| General Motors |
| Marks and Spencer |
GM and Marks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Marks
The main advantage of trading using opposite GM and Marks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Marks 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 Marks will offset losses from the drop in Marks' long position.The idea behind General Motors and Marks and Spencer 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.| Marks vs. STRAYER EDUCATION | Marks vs. Sportsmans Warehouse Holdings | Marks vs. JD SPORTS FASH | Marks vs. VIAPLAY GROUP AB |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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