Correlation Between GM and One Liberty
Can any of the company-specific risk be diversified away by investing in both GM and One Liberty 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 One Liberty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and One Liberty Properties, you can compare the effects of market volatilities on GM and One Liberty 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 One Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and One Liberty.
Diversification Opportunities for GM and One Liberty
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and One is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and One Liberty Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Liberty Properties 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 One Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Liberty Properties has no effect on the direction of GM i.e., GM and One Liberty go up and down completely randomly.
Pair Corralation between GM and One Liberty
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.36 times more return on investment than One Liberty. However, GM is 1.36 times more volatile than One Liberty Properties. It trades about 0.14 of its potential returns per unit of risk. One Liberty Properties is currently generating about 0.13 per unit of risk. If you would invest 3,135 in General Motors on August 26, 2024 and sell it today you would earn a total of 2,718 from holding General Motors or generate 86.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. One Liberty Properties
Performance |
| Timeline |
| General Motors |
| One Liberty Properties |
GM and One Liberty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and One Liberty
The main advantage of trading using opposite GM and One Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, One Liberty 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 One Liberty will offset losses from the drop in One Liberty's long position.The idea behind General Motors and One Liberty Properties 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.| One Liberty vs. Generationome Properties | One Liberty vs. Modiv Inc | One Liberty vs. Armada Hflr Pr | One Liberty vs. NexPoint Diversified Real |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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