Correlation Between GM and Loomis AB

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

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

Diversification Opportunities for GM and Loomis AB

-0.78

Correlation Coefficient

GM  Loomis AB

Pay attention - limited upside

The 3 months correlation between GM and Loomis is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Loomis AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loomis AB ser 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 Loomis AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loomis AB ser has no effect on the direction of GM i.e., GM and Loomis AB go up and down completely randomly.

Pair Corralation between GM and Loomis AB

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.08 times more return on investment than Loomis AB. However, GM is 1.08 times more volatile than Loomis AB ser. It trades about 0.04 of its potential returns per unit of risk. Loomis AB ser is currently generating about 0.04 per unit of risk. If you would invest  3,510  in General Motors on December 2, 2024 and sell it today you would earn a total of  1,403  from holding General Motors or generate 39.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Loomis AB ser

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Loomis AB ser

Risk-Adjusted Performance

Good

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

Pair Trading with GM and Loomis AB

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

The idea behind General Motors and Loomis AB ser 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.