Correlation Between GM and REGAL HOTEL
Can any of the company-specific risk be diversified away by investing in both GM and REGAL HOTEL 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 REGAL HOTEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and REGAL HOTEL INTL, you can compare the effects of market volatilities on GM and REGAL HOTEL 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 REGAL HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and REGAL HOTEL.
Diversification Opportunities for GM and REGAL HOTEL
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and REGAL is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and REGAL HOTEL INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REGAL HOTEL INTL 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 REGAL HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REGAL HOTEL INTL has no effect on the direction of GM i.e., GM and REGAL HOTEL go up and down completely randomly.
Pair Corralation between GM and REGAL HOTEL
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the REGAL HOTEL. In addition to that, GM is 1.68 times more volatile than REGAL HOTEL INTL. It trades about -0.13 of its total potential returns per unit of risk. REGAL HOTEL INTL is currently generating about -0.08 per unit of volatility. If you would invest 30.00 in REGAL HOTEL INTL on November 5, 2024 and sell it today you would lose (1.00) from holding REGAL HOTEL INTL or give up 3.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
General Motors vs. REGAL HOTEL INTL
Performance |
| Timeline |
| General Motors |
| REGAL HOTEL INTL |
GM and REGAL HOTEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and REGAL HOTEL
The main advantage of trading using opposite GM and REGAL HOTEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, REGAL HOTEL 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 REGAL HOTEL will offset losses from the drop in REGAL HOTEL's long position.The idea behind General Motors and REGAL HOTEL INTL 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.| REGAL HOTEL vs. Apple Inc | REGAL HOTEL vs. Apple Inc | REGAL HOTEL vs. Apple Inc | REGAL HOTEL vs. Apple Inc |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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