Correlation Between GM and Boxer Retail

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Can any of the company-specific risk be diversified away by investing in both GM and Boxer Retail 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 Boxer Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Boxer Retail, you can compare the effects of market volatilities on GM and Boxer Retail 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 Boxer Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Boxer Retail.

Diversification Opportunities for GM and Boxer Retail

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between GM and Boxer is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Boxer Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boxer Retail 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 Boxer Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boxer Retail has no effect on the direction of GM i.e., GM and Boxer Retail go up and down completely randomly.

Pair Corralation between GM and Boxer Retail

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Boxer Retail. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.89 times less risky than Boxer Retail. The stock trades about -0.13 of its potential returns per unit of risk. The Boxer Retail is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  540,000  in Boxer Retail on September 16, 2024 and sell it today you would earn a total of  108,500  from holding Boxer Retail or generate 20.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy71.43%
ValuesDaily Returns

General Motors  vs.  Boxer Retail

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.
Boxer Retail 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Boxer Retail are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Boxer Retail exhibited solid returns over the last few months and may actually be approaching a breakup point.

GM and Boxer Retail Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Boxer Retail

The main advantage of trading using opposite GM and Boxer Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Boxer Retail 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 Boxer Retail will offset losses from the drop in Boxer Retail's long position.
The idea behind General Motors and Boxer Retail 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.
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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