Correlation Between Dillards and GM

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Can any of the company-specific risk be diversified away by investing in both Dillards and GM 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 Dillards and GM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dillards and General Motors, you can compare the effects of market volatilities on Dillards and GM 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 Dillards with a short position of GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dillards and GM.

Diversification Opportunities for Dillards and GM

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Dillards and GM is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dillards and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Dillards 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 Dillards are associated (or correlated) with GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Dillards i.e., Dillards and GM go up and down completely randomly.

Pair Corralation between Dillards and GM

Considering the 90-day investment horizon Dillards is expected to generate 1.39 times more return on investment than GM. However, Dillards is 1.39 times more volatile than General Motors. It trades about 0.06 of its potential returns per unit of risk. General Motors is currently generating about 0.02 per unit of risk. If you would invest  24,917  in Dillards on December 30, 2023 and sell it today you would earn a total of  22,247  from holding Dillards or generate 89.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Dillards  vs.  General Motors

 Performance 
       Timeline  
Dillards 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Dillards are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Dillards unveiled solid returns over the last few months and may actually be approaching a breakup point.
General Motors 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Dillards and GM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dillards and GM

The main advantage of trading using opposite Dillards and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dillards position performs unexpectedly, GM 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 GM will offset losses from the drop in GM's long position.
The idea behind Dillards and General Motors 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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