Correlation Between GM and Oxford Industries
Can any of the company-specific risk be diversified away by investing in both GM and Oxford Industries 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 Oxford Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Oxford Industries, you can compare the effects of market volatilities on GM and Oxford Industries 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 Oxford Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Oxford Industries.
Diversification Opportunities for GM and Oxford Industries
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Oxford is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Oxford Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oxford Industries 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 Oxford Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oxford Industries has no effect on the direction of GM i.e., GM and Oxford Industries go up and down completely randomly.
Pair Corralation between GM and Oxford Industries
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.98 times more return on investment than Oxford Industries. However, General Motors is 1.02 times less risky than Oxford Industries. It trades about 0.14 of its potential returns per unit of risk. Oxford Industries is currently generating about -0.02 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 Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Oxford Industries
Performance |
| Timeline |
| General Motors |
| Oxford Industries |
GM and Oxford Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Oxford Industries
The main advantage of trading using opposite GM and Oxford Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Oxford Industries 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 Oxford Industries will offset losses from the drop in Oxford Industries' long position.The idea behind General Motors and Oxford Industries 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.| Oxford Industries vs. G III Apparel Group | Oxford Industries vs. Ermenegildo Zegna NV | Oxford Industries vs. Kontoor Brands | Oxford Industries vs. Columbia Sportswear |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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