Correlation Between GM and Warehouses
Can any of the company-specific risk be diversified away by investing in both GM and Warehouses 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 Warehouses into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Warehouses De Pauw, you can compare the effects of market volatilities on GM and Warehouses 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 Warehouses. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Warehouses.
Diversification Opportunities for GM and Warehouses
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Warehouses is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Warehouses De Pauw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warehouses De Pauw 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 Warehouses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warehouses De Pauw has no effect on the direction of GM i.e., GM and Warehouses go up and down completely randomly.
Pair Corralation between GM and Warehouses
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Warehouses. In addition to that, GM is 1.89 times more volatile than Warehouses De Pauw. It trades about -0.16 of its total potential returns per unit of risk. Warehouses De Pauw is currently generating about -0.1 per unit of volatility. If you would invest 2,040 in Warehouses De Pauw on September 13, 2024 and sell it today you would lose (65.00) from holding Warehouses De Pauw or give up 3.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. Warehouses De Pauw
Performance |
| Timeline |
| General Motors |
| Warehouses De Pauw |
GM and Warehouses Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Warehouses
The main advantage of trading using opposite GM and Warehouses positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Warehouses 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 Warehouses will offset losses from the drop in Warehouses' long position.The idea behind General Motors and Warehouses De Pauw 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.| Warehouses vs. Extra Space Storage | Warehouses vs. REXFORD INDREALTY DL 01 | Warehouses vs. CubeSmart | Warehouses vs. First Industrial Realty |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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