Correlation Between GM and CDN Maverick
Can any of the company-specific risk be diversified away by investing in both GM and CDN Maverick 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 CDN Maverick into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and CDN Maverick Capital, you can compare the effects of market volatilities on GM and CDN Maverick 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 CDN Maverick. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and CDN Maverick.
Diversification Opportunities for GM and CDN Maverick
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and CDN is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CDN Maverick Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN Maverick Capital 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 CDN Maverick. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN Maverick Capital has no effect on the direction of GM i.e., GM and CDN Maverick go up and down completely randomly.
Pair Corralation between GM and CDN Maverick
Allowing for the 90-day total investment horizon GM is expected to generate 1.35 times less return on investment than CDN Maverick. But when comparing it to its historical volatility, General Motors is 2.64 times less risky than CDN Maverick. It trades about 0.08 of its potential returns per unit of risk. CDN Maverick Capital is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 10.00 in CDN Maverick Capital on September 1, 2024 and sell it today you would earn a total of 1.00 from holding CDN Maverick Capital or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
General Motors vs. CDN Maverick Capital
Performance |
| Timeline |
| General Motors |
| CDN Maverick Capital |
GM and CDN Maverick Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and CDN Maverick
The main advantage of trading using opposite GM and CDN Maverick positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, CDN Maverick 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 CDN Maverick will offset losses from the drop in CDN Maverick's long position.The idea behind General Motors and CDN Maverick Capital 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.| CDN Maverick vs. Aurelia Metals Limited | CDN Maverick vs. Artemis Resources | CDN Maverick vs. Ascendant Resources | CDN Maverick vs. Azimut Exploration |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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