Correlation Between GM and Timberland Bancorp
Can any of the company-specific risk be diversified away by investing in both GM and Timberland Bancorp 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 Timberland Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Timberland Bancorp, you can compare the effects of market volatilities on GM and Timberland Bancorp 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 Timberland Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Timberland Bancorp.
Diversification Opportunities for GM and Timberland Bancorp
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Timberland is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Timberland Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timberland Bancorp 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 Timberland Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timberland Bancorp has no effect on the direction of GM i.e., GM and Timberland Bancorp go up and down completely randomly.
Pair Corralation between GM and Timberland Bancorp
Allowing for the 90-day total investment horizon GM is expected to generate 1.12 times less return on investment than Timberland Bancorp. But when comparing it to its historical volatility, General Motors is 1.15 times less risky than Timberland Bancorp. It trades about 0.08 of its potential returns per unit of risk. Timberland Bancorp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,517 in Timberland Bancorp on September 3, 2024 and sell it today you would earn a total of 722.00 from holding Timberland Bancorp or generate 28.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Timberland Bancorp
Performance |
| Timeline |
| General Motors |
| Timberland Bancorp |
GM and Timberland Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Timberland Bancorp
The main advantage of trading using opposite GM and Timberland Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Timberland Bancorp 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 Timberland Bancorp will offset losses from the drop in Timberland Bancorp's long position.The idea behind General Motors and Timberland Bancorp 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.| Timberland Bancorp vs. First Financial Northwest | Timberland Bancorp vs. FVCBankcorp | Timberland Bancorp vs. Community West Bancshares | Timberland Bancorp vs. Sierra Bancorp |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |