Correlation Between GM and Gensource Potash
Can any of the company-specific risk be diversified away by investing in both GM and Gensource Potash 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 Gensource Potash into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Gensource Potash, you can compare the effects of market volatilities on GM and Gensource Potash 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 Gensource Potash. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Gensource Potash.
Diversification Opportunities for GM and Gensource Potash
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Gensource is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Gensource Potash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gensource Potash 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 Gensource Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gensource Potash has no effect on the direction of GM i.e., GM and Gensource Potash go up and down completely randomly.
Pair Corralation between GM and Gensource Potash
Allowing for the 90-day total investment horizon GM is expected to generate 17.78 times less return on investment than Gensource Potash. But when comparing it to its historical volatility, General Motors is 23.66 times less risky than Gensource Potash. It trades about 0.13 of its potential returns per unit of risk. Gensource Potash is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5.00 in Gensource Potash on September 1, 2024 and sell it today you would earn a total of 1.00 from holding Gensource Potash or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Gensource Potash
Performance |
| Timeline |
| General Motors |
| Gensource Potash |
GM and Gensource Potash Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Gensource Potash
The main advantage of trading using opposite GM and Gensource Potash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Gensource Potash 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 Gensource Potash will offset losses from the drop in Gensource Potash's long position.The idea behind General Motors and Gensource Potash 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.| Gensource Potash vs. South32 Limited | Gensource Potash vs. NioCorp Developments Ltd | Gensource Potash vs. HUMANA INC | Gensource Potash vs. SCOR PK |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |