Correlation Between Stagwell and GENERAL

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

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

Diversification Opportunities for Stagwell and GENERAL

0.45

Correlation Coefficient

Stagwell  GENERAL

Very weak diversification

The 3 months correlation between Stagwell and GENERAL is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Stagwell 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 Stagwell 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 Stagwell 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 Stagwell i.e., Stagwell and GENERAL go up and down completely randomly.

Pair Corralation between Stagwell and GENERAL

Given the investment horizon of 90 days Stagwell is expected to under-perform the GENERAL. But the stock apears to be less risky and, when comparing its historical volatility, Stagwell is 3.08 times less risky than GENERAL. The stock trades about -0.7 of its potential returns per unit of risk. The GENERAL ELEC CAP is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  10,161  in GENERAL ELEC CAP on October 11, 2024 and sell it today you would lose (156.00) from holding GENERAL ELEC CAP or give up 1.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	52.38%
Values	Daily Returns

Stagwell  vs.  GENERAL ELEC CAP

Stagwell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stagwell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stagwell and GENERAL

The main advantage of trading using opposite Stagwell and GENERAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stagwell 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 Stagwell 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.