Correlation Between GM and Lens Technology

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

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

Diversification Opportunities for GM and Lens Technology

0.5

Correlation Coefficient

GM  Lens Technology

Very weak diversification

The 3 months correlation between GM and Lens is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Lens Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lens Technology 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 Lens Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lens Technology has no effect on the direction of GM i.e., GM and Lens Technology go up and down completely randomly.

Pair Corralation between GM and Lens Technology

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Lens Technology. In addition to that, GM is 1.17 times more volatile than Lens Technology Co. It trades about -0.11 of its total potential returns per unit of risk. Lens Technology Co is currently generating about 0.15 per unit of volatility. If you would invest  2,108  in Lens Technology Co on September 22, 2024 and sell it today you would earn a total of  166.00  from holding Lens Technology Co or generate 7.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.3%
Values	Daily Returns

General Motors  vs.  Lens Technology Co

General Motors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lens Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lens Technology Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lens Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Lens Technology

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

The idea behind General Motors and Lens Technology Co 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.