Correlation Between GM and City Retail
Can any of the company-specific risk be diversified away by investing in both GM and City Retail 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 City Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and City Retail Developments, you can compare the effects of market volatilities on GM and City Retail 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 City Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and City Retail.
Diversification Opportunities for GM and City Retail
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and City is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and City Retail Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Retail Developments 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 City Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Retail Developments has no effect on the direction of GM i.e., GM and City Retail go up and down completely randomly.
Pair Corralation between GM and City Retail
Allowing for the 90-day total investment horizon General Motors is expected to generate 5.37 times more return on investment than City Retail. However, GM is 5.37 times more volatile than City Retail Developments. It trades about 0.16 of its potential returns per unit of risk. City Retail Developments is currently generating about 0.0 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 Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. City Retail Developments
Performance |
| Timeline |
| General Motors |
| City Retail Developments |
GM and City Retail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and City Retail
The main advantage of trading using opposite GM and City Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, City Retail 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 City Retail will offset losses from the drop in City Retail's long position.The idea behind General Motors and City Retail Developments 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.| City Retail vs. Lippo Cikarang Tbk | City Retail vs. Lippo Karawaci Tbk | City Retail vs. Mitra Pinasthika Mustika | City Retail vs. Jakarta Int Hotels |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |