Correlation Between GM and Reitmans (Canada)

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

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

Diversification Opportunities for GM and Reitmans (Canada)

-0.63

Correlation Coefficient

GM  Reitmans (Canada)

Excellent diversification

The 3 months correlation between GM and Reitmans is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Reitmans Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reitmans (Canada) 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 Reitmans (Canada). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reitmans (Canada) has no effect on the direction of GM i.e., GM and Reitmans (Canada) go up and down completely randomly.

Pair Corralation between GM and Reitmans (Canada)

Allowing for the 90-day total investment horizon GM is expected to generate 4.73 times less return on investment than Reitmans (Canada). But when comparing it to its historical volatility, General Motors is 1.68 times less risky than Reitmans (Canada). It trades about 0.02 of its potential returns per unit of risk. Reitmans Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  98.00  in Reitmans Limited on January 24, 2024 and sell it today you would earn a total of  73.00  from holding Reitmans Limited or generate 74.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

General Motors  vs.  Reitmans Limited

General Motors

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 17 (%) 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.

Reitmans (Canada)

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reitmans Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with GM and Reitmans (Canada)

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

The idea behind General Motors and Reitmans Limited 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.

Check out your portfolio center.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.