Correlation Between GM and Columbia Income
Can any of the company-specific risk be diversified away by investing in both GM and Columbia Income 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 Columbia Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Columbia Income Builder, you can compare the effects of market volatilities on GM and Columbia Income 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 Columbia Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Columbia Income.
Diversification Opportunities for GM and Columbia Income
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Columbia is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Columbia Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Income Builder 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 Columbia Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Income Builder has no effect on the direction of GM i.e., GM and Columbia Income go up and down completely randomly.
Pair Corralation between GM and Columbia Income
Allowing for the 90-day total investment horizon General Motors is expected to generate 5.19 times more return on investment than Columbia Income. However, GM is 5.19 times more volatile than Columbia Income Builder. It trades about 0.05 of its potential returns per unit of risk. Columbia Income Builder is currently generating about 0.07 per unit of risk. If you would invest 3,778 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,781 from holding General Motors or generate 47.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
General Motors vs. Columbia Income Builder
Performance |
| Timeline |
| General Motors |
| Columbia Income Builder |
GM and Columbia Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Columbia Income
The main advantage of trading using opposite GM and Columbia Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Columbia Income 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 Columbia Income will offset losses from the drop in Columbia Income's long position.The idea behind General Motors and Columbia Income Builder 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.| Columbia Income vs. Sarofim Equity | Columbia Income vs. Us Vector Equity | Columbia Income vs. Ab Select Equity | Columbia Income vs. Jpmorgan Equity Income |
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.
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