Correlation Between GM and Benton Resources
Can any of the company-specific risk be diversified away by investing in both GM and Benton Resources 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 Benton Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Benton Resources, you can compare the effects of market volatilities on GM and Benton Resources 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 Benton Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Benton Resources.
Diversification Opportunities for GM and Benton Resources
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Benton is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Benton Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benton Resources 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 Benton Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benton Resources has no effect on the direction of GM i.e., GM and Benton Resources go up and down completely randomly.
Pair Corralation between GM and Benton Resources
Allowing for the 90-day total investment horizon GM is expected to generate 18.32 times less return on investment than Benton Resources. But when comparing it to its historical volatility, General Motors is 10.25 times less risky than Benton Resources. It trades about 0.05 of its potential returns per unit of risk. Benton Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 8.00 in Benton Resources on August 30, 2024 and sell it today you would lose (3.00) from holding Benton Resources or give up 37.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Benton Resources
Performance |
| Timeline |
| General Motors |
| Benton Resources |
GM and Benton Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Benton Resources
The main advantage of trading using opposite GM and Benton Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Benton Resources 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 Benton Resources will offset losses from the drop in Benton Resources' long position.The idea behind General Motors and Benton Resources 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.| Benton Resources vs. Silver Hammer Mining | Benton Resources vs. Reyna Silver Corp | Benton Resources vs. Guanajuato Silver | Benton Resources vs. Silver One Resources |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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