Correlation Between GM and Calvert Large

Can any of the company-specific risk be diversified away by investing in both GM and Calvert Large 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 Calvert Large into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Calvert Large Cap E, you can compare the effects of market volatilities on GM and Calvert Large 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 Calvert Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Calvert Large.

Diversification Opportunities for GM and Calvert Large

0.79

Correlation Coefficient

GM  Calvert Large

Poor diversification

The 3 months correlation between GM and Calvert is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Calvert Large Cap E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Large Cap 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 Calvert Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Large Cap has no effect on the direction of GM i.e., GM and Calvert Large go up and down completely randomly.

Pair Corralation between GM and Calvert Large

Allowing for the 90-day total investment horizon General Motors is expected to generate 3.41 times more return on investment than Calvert Large. However, GM is 3.41 times more volatile than Calvert Large Cap E. It trades about 0.09 of its potential returns per unit of risk. Calvert Large Cap E is currently generating about 0.18 per unit of risk. If you would invest  4,620  in General Motors on September 13, 2024 and sell it today you would earn a total of  610.00  from holding General Motors or generate 13.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

General Motors  vs.  Calvert Large Cap E

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

Calvert Large Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Large Cap E are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Calvert Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and Calvert Large

The main advantage of trading using opposite GM and Calvert Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Calvert Large 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 Calvert Large will offset losses from the drop in Calvert Large's long position.

The idea behind General Motors and Calvert Large Cap E 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.