Correlation Between GM and Benakat Petroleum
Can any of the company-specific risk be diversified away by investing in both GM and Benakat Petroleum 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 Benakat Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Benakat Petroleum Energy, you can compare the effects of market volatilities on GM and Benakat Petroleum 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 Benakat Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Benakat Petroleum.
Diversification Opportunities for GM and Benakat Petroleum
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Benakat is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Benakat Petroleum Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benakat Petroleum Energy 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 Benakat Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benakat Petroleum Energy has no effect on the direction of GM i.e., GM and Benakat Petroleum go up and down completely randomly.
Pair Corralation between GM and Benakat Petroleum
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.14 times more return on investment than Benakat Petroleum. However, GM is 1.14 times more volatile than Benakat Petroleum Energy. It trades about 0.08 of its potential returns per unit of risk. Benakat Petroleum Energy is currently generating about 0.06 per unit of risk. If you would invest 4,645 in General Motors on December 10, 2024 and sell it today you would earn a total of 163.00 from holding General Motors or generate 3.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
General Motors vs. Benakat Petroleum Energy
Performance |
| Timeline |
| General Motors |
| Benakat Petroleum Energy |
GM and Benakat Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Benakat Petroleum
The main advantage of trading using opposite GM and Benakat Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Benakat Petroleum 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 Benakat Petroleum will offset losses from the drop in Benakat Petroleum's long position.The idea behind General Motors and Benakat Petroleum Energy 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.| Benakat Petroleum vs. Bumi Resources Minerals | ||
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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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