Correlation Between GM and Learning Technologies

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

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

Diversification Opportunities for GM and Learning Technologies

-0.16

Correlation Coefficient

GM  Learning Technologies

Good diversification

The 3 months correlation between GM and Learning is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Learning Technologies Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Learning Technologies 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 Learning Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Learning Technologies has no effect on the direction of GM i.e., GM and Learning Technologies go up and down completely randomly.

Pair Corralation between GM and Learning Technologies

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.84 times more return on investment than Learning Technologies. However, GM is 1.84 times more volatile than Learning Technologies Group. It trades about 0.09 of its potential returns per unit of risk. Learning Technologies Group is currently generating about 0.07 per unit of risk. If you would invest  4,591  in General Motors on October 8, 2024 and sell it today you would earn a total of  586.00  from holding General Motors or generate 12.76% return on investment over 90 days.

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

General Motors  vs.  Learning Technologies Group

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.

Learning Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Learning Technologies Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Learning Technologies is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GM and Learning Technologies

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

The idea behind General Motors and Learning Technologies Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.