Correlation Between Levi Strauss and GENERAL

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

By analyzing existing cross correlation between Levi Strauss Co and GENERAL ELEC CAP, you can compare the effects of market volatilities on Levi Strauss and GENERAL 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 Levi Strauss with a short position of GENERAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Levi Strauss and GENERAL.

Diversification Opportunities for Levi Strauss and GENERAL

-0.18

Correlation Coefficient

Levi Strauss  GENERAL

Good diversification

The 3 months correlation between Levi and GENERAL is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Levi Strauss Co and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP and Levi Strauss 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 Levi Strauss Co are associated (or correlated) with GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Levi Strauss i.e., Levi Strauss and GENERAL go up and down completely randomly.

Pair Corralation between Levi Strauss and GENERAL

Given the investment horizon of 90 days Levi Strauss Co is expected to generate 1.0 times more return on investment than GENERAL. However, Levi Strauss is 1.0 times more volatile than GENERAL ELEC CAP. It trades about 0.1 of its potential returns per unit of risk. GENERAL ELEC CAP is currently generating about -0.07 per unit of risk. If you would invest  1,743  in Levi Strauss Co on October 11, 2024 and sell it today you would earn a total of  43.00  from holding Levi Strauss Co or generate 2.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

Levi Strauss Co  vs.  GENERAL ELEC CAP

Levi Strauss

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Levi Strauss Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Levi Strauss is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Levi Strauss and GENERAL

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

The idea behind Levi Strauss Co and GENERAL ELEC CAP 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.