Correlation Between GM and Signet Jewelers
Can any of the company-specific risk be diversified away by investing in both GM and Signet Jewelers 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 Signet Jewelers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Signet Jewelers, you can compare the effects of market volatilities on GM and Signet Jewelers 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 Signet Jewelers. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Signet Jewelers.
Diversification Opportunities for GM and Signet Jewelers
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Signet is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Signet Jewelers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signet Jewelers 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 Signet Jewelers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signet Jewelers has no effect on the direction of GM i.e., GM and Signet Jewelers go up and down completely randomly.
Pair Corralation between GM and Signet Jewelers
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.6 times more return on investment than Signet Jewelers. However, General Motors is 1.68 times less risky than Signet Jewelers. It trades about -0.1 of its potential returns per unit of risk. Signet Jewelers is currently generating about -0.25 per unit of risk. If you would invest 5,327 in General Motors on November 1, 2024 and sell it today you would lose (349.00) from holding General Motors or give up 6.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
General Motors vs. Signet Jewelers
Performance |
| Timeline |
| General Motors |
| Signet Jewelers |
GM and Signet Jewelers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Signet Jewelers
The main advantage of trading using opposite GM and Signet Jewelers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Signet Jewelers 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 Signet Jewelers will offset losses from the drop in Signet Jewelers' long position.The idea behind General Motors and Signet Jewelers 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.| Signet Jewelers vs. Tapestry | Signet Jewelers vs. Movado Group | Signet Jewelers vs. Lanvin Group Holdings | Signet Jewelers vs. TheRealReal |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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