Correlation Between GM and Advantage Oil
Can any of the company-specific risk be diversified away by investing in both GM and Advantage Oil 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 Advantage Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Advantage Oil Gas, you can compare the effects of market volatilities on GM and Advantage Oil 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 Advantage Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Advantage Oil.
Diversification Opportunities for GM and Advantage Oil
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Advantage is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Advantage Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Oil Gas 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 Advantage Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Oil Gas has no effect on the direction of GM i.e., GM and Advantage Oil go up and down completely randomly.
Pair Corralation between GM and Advantage Oil
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.1 times more return on investment than Advantage Oil. However, GM is 1.1 times more volatile than Advantage Oil Gas. It trades about 0.07 of its potential returns per unit of risk. Advantage Oil Gas is currently generating about 0.01 per unit of risk. If you would invest 5,273 in General Motors on August 29, 2024 and sell it today you would earn a total of 206.00 from holding General Motors or generate 3.91% 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. Advantage Oil Gas
Performance |
| Timeline |
| General Motors |
| Advantage Oil Gas |
GM and Advantage Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Advantage Oil
The main advantage of trading using opposite GM and Advantage Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Advantage Oil 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 Advantage Oil will offset losses from the drop in Advantage Oil's long position.The idea behind General Motors and Advantage Oil Gas 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.| Advantage Oil vs. Birchcliff Energy | Advantage Oil vs. NuVista Energy | Advantage Oil vs. Kelt Exploration | Advantage Oil vs. Peyto ExplorationDevelopment Corp |
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 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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