Correlation Between GM and Bonterra Resources
Can any of the company-specific risk be diversified away by investing in both GM and Bonterra 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 Bonterra 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 Bonterra Resources, you can compare the effects of market volatilities on GM and Bonterra 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 Bonterra Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Bonterra Resources.
Diversification Opportunities for GM and Bonterra Resources
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and Bonterra is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Bonterra Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonterra 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 Bonterra Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonterra Resources has no effect on the direction of GM i.e., GM and Bonterra Resources go up and down completely randomly.
Pair Corralation between GM and Bonterra Resources
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Bonterra Resources. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.89 times less risky than Bonterra Resources. The stock trades about -0.32 of its potential returns per unit of risk. The Bonterra Resources is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 14.00 in Bonterra Resources on November 28, 2024 and sell it today you would earn a total of 1.00 from holding Bonterra Resources or generate 7.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Bonterra Resources
Performance |
| Timeline |
| General Motors |
| Bonterra Resources |
GM and Bonterra Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Bonterra Resources
The main advantage of trading using opposite GM and Bonterra Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Bonterra 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 Bonterra Resources will offset losses from the drop in Bonterra Resources' long position.The idea behind General Motors and Bonterra 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.| Bonterra Resources vs. Gander Gold | Bonterra Resources vs. Sokoman Minerals Corp | Bonterra Resources vs. Labrador Gold Corp | Bonterra Resources vs. Precipitate Gold 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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