Correlation Between GM and Berry Petroleum
Can any of the company-specific risk be diversified away by investing in both GM and Berry 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 Berry 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 Berry Petroleum Corp, you can compare the effects of market volatilities on GM and Berry 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 Berry Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Berry Petroleum.
Diversification Opportunities for GM and Berry Petroleum
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Berry is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Berry Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berry Petroleum Corp 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 Berry Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berry Petroleum Corp has no effect on the direction of GM i.e., GM and Berry Petroleum go up and down completely randomly.
Pair Corralation between GM and Berry Petroleum
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.86 times more return on investment than Berry Petroleum. However, General Motors is 1.16 times less risky than Berry Petroleum. It trades about 0.05 of its potential returns per unit of risk. Berry Petroleum Corp is currently generating about -0.02 per unit of risk. If you would invest 3,731 in General Motors on August 27, 2024 and sell it today you would earn a total of 2,122 from holding General Motors or generate 56.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Berry Petroleum Corp
Performance |
| Timeline |
| General Motors |
| Berry Petroleum Corp |
GM and Berry Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Berry Petroleum
The main advantage of trading using opposite GM and Berry Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Berry 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 Berry Petroleum will offset losses from the drop in Berry Petroleum's long position.The idea behind General Motors and Berry Petroleum Corp 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.| Berry Petroleum vs. California Resources Corp | Berry Petroleum vs. Magnolia Oil Gas | Berry Petroleum vs. Comstock Resources | Berry Petroleum vs. Gulfport Energy Operating |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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