Correlation Between GM and Cohen Steers

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

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

Diversification Opportunities for GM and Cohen Steers

0.63

Correlation Coefficient

GM  Cohen Steers

Poor diversification

The 3 months correlation between GM and Cohen is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Cohen Steers Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cohen Steers Low 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 Cohen Steers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cohen Steers Low has no effect on the direction of GM i.e., GM and Cohen Steers go up and down completely randomly.

Pair Corralation between GM and Cohen Steers

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Cohen Steers. In addition to that, GM is 19.46 times more volatile than Cohen Steers Low. It trades about -0.14 of its total potential returns per unit of risk. Cohen Steers Low is currently generating about -0.07 per unit of volatility. If you would invest  951.00  in Cohen Steers Low on September 13, 2024 and sell it today you would lose (2.00) from holding Cohen Steers Low or give up 0.21% of portfolio value over 90 days.

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

General Motors  vs.  Cohen Steers Low

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.

Cohen Steers Low

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cohen Steers Low are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Cohen Steers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Cohen Steers

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

The idea behind General Motors and Cohen Steers Low 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.