Correlation Between GM and Unum
Can any of the company-specific risk be diversified away by investing in both GM and Unum 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 Unum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Unum Group, you can compare the effects of market volatilities on GM and Unum 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 Unum. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Unum.
Diversification Opportunities for GM and Unum
Very poor diversification
The 3 months correlation between GM and Unum is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Unum Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unum Group 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 Unum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unum Group has no effect on the direction of GM i.e., GM and Unum go up and down completely randomly.
Pair Corralation between GM and Unum
Allowing for the 90-day total investment horizon GM is expected to generate 1.28 times less return on investment than Unum. In addition to that, GM is 1.24 times more volatile than Unum Group. It trades about 0.06 of its total potential returns per unit of risk. Unum Group is currently generating about 0.09 per unit of volatility. If you would invest 3,864 in Unum Group on August 28, 2024 and sell it today you would earn a total of 3,757 from holding Unum Group or generate 97.23% 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. Unum Group
Performance |
| Timeline |
| General Motors |
| Unum Group |
GM and Unum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Unum
The main advantage of trading using opposite GM and Unum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Unum 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 Unum will offset losses from the drop in Unum's long position.The idea behind General Motors and Unum Group 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.| Unum vs. Morningstar Unconstrained Allocation | Unum vs. Via Renewables | Unum vs. Sitka Gold Corp | Unum vs. MSCI ACWI exAUCONSUMER |
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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