Correlation Between GM and Reitmans (Canada)
Can any of the company-specific risk be diversified away by investing in both GM and Reitmans (Canada) 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 Reitmans (Canada) into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Reitmans Limited, you can compare the effects of market volatilities on GM and Reitmans (Canada) 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 Reitmans (Canada). Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Reitmans (Canada).
Diversification Opportunities for GM and Reitmans (Canada)
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Reitmans is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Reitmans Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reitmans (Canada) 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 Reitmans (Canada). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reitmans (Canada) has no effect on the direction of GM i.e., GM and Reitmans (Canada) go up and down completely randomly.
Pair Corralation between GM and Reitmans (Canada)
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.17 times more return on investment than Reitmans (Canada). However, GM is 1.17 times more volatile than Reitmans Limited. It trades about 0.05 of its potential returns per unit of risk. Reitmans Limited is currently generating about -0.01 per unit of risk. If you would invest 3,924 in General Motors on December 4, 2024 and sell it today you would earn a total of 814.00 from holding General Motors or generate 20.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.59% |
| Values | Daily Returns |
General Motors vs. Reitmans Limited
Performance |
| Timeline |
| General Motors |
| Reitmans (Canada) |
GM and Reitmans (Canada) Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Reitmans (Canada)
The main advantage of trading using opposite GM and Reitmans (Canada) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Reitmans (Canada) 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 Reitmans (Canada) will offset losses from the drop in Reitmans (Canada)'s long position.The idea behind General Motors and Reitmans Limited 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.| Reitmans (Canada) vs. Reitmans Canada | Reitmans (Canada) vs. Lite Access Technologies | Reitmans (Canada) vs. Legend Power Systems | Reitmans (Canada) vs. Supremex |
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 Stocks Directory module to find actively traded stocks across global markets.
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