Correlation Between GM and Caldas Gold
Can any of the company-specific risk be diversified away by investing in both GM and Caldas Gold 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 Caldas Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Caldas Gold, you can compare the effects of market volatilities on GM and Caldas Gold 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 Caldas Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Caldas Gold.
Diversification Opportunities for GM and Caldas Gold
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and Caldas is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Caldas Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caldas Gold 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 Caldas Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caldas Gold has no effect on the direction of GM i.e., GM and Caldas Gold go up and down completely randomly.
Pair Corralation between GM and Caldas Gold
Allowing for the 90-day total investment horizon GM is expected to generate 689.53 times less return on investment than Caldas Gold. But when comparing it to its historical volatility, General Motors is 180.75 times less risky than Caldas Gold. It trades about 0.09 of its potential returns per unit of risk. Caldas Gold is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 0.05 in Caldas Gold on September 14, 2024 and sell it today you would earn a total of 17.95 from holding Caldas Gold or generate 35900.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 3.21% |
| Values | Daily Returns |
General Motors vs. Caldas Gold
Performance |
| Timeline |
| General Motors |
| Caldas Gold |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Caldas Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Caldas Gold
The main advantage of trading using opposite GM and Caldas Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Caldas Gold 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 Caldas Gold will offset losses from the drop in Caldas Gold's long position.The idea behind General Motors and Caldas Gold 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.| Caldas Gold vs. SunLink Health Systems | Caldas Gold vs. Asbury Automotive Group | Caldas Gold vs. Radcom | Caldas Gold vs. US Global Investors |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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