Correlation Between GM and Canada Goose

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

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

Diversification Opportunities for GM and Canada Goose

-0.36

Correlation Coefficient

GM  Canada Goose

Very good diversification

The 3 months correlation between GM and Canada is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Canada Goose Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canada Goose Holdings 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 Canada Goose. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canada Goose Holdings has no effect on the direction of GM i.e., GM and Canada Goose go up and down completely randomly.

Pair Corralation between GM and Canada Goose

Allowing for the 90-day total investment horizon GM is expected to generate 2066.0 times less return on investment than Canada Goose. But when comparing it to its historical volatility, General Motors is 3.08 times less risky than Canada Goose. It trades about 0.0 of its potential returns per unit of risk. Canada Goose Holdings is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,147  in Canada Goose Holdings on March 5, 2024 and sell it today you would earn a total of  299.00  from holding Canada Goose Holdings or generate 26.07% 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.  Canada Goose Holdings

General Motors

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Canada Goose Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canada Goose Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Canada Goose unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Canada Goose

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

The idea behind General Motors and Canada Goose Holdings 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.