Correlation Between GM and Classic Minerals
Can any of the company-specific risk be diversified away by investing in both GM and Classic Minerals 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 Classic Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Classic Minerals, you can compare the effects of market volatilities on GM and Classic Minerals 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 Classic Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Classic Minerals.
Diversification Opportunities for GM and Classic Minerals
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Classic is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Classic Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Classic Minerals 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 Classic Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Classic Minerals has no effect on the direction of GM i.e., GM and Classic Minerals go up and down completely randomly.
Pair Corralation between GM and Classic Minerals
Allowing for the 90-day total investment horizon GM is expected to generate 16.22 times less return on investment than Classic Minerals. But when comparing it to its historical volatility, General Motors is 22.17 times less risky than Classic Minerals. It trades about 0.05 of its potential returns per unit of risk. Classic Minerals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1.10 in Classic Minerals on September 2, 2024 and sell it today you would lose (1.00) from holding Classic Minerals or give up 90.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
General Motors vs. Classic Minerals
Performance |
| Timeline |
| General Motors |
| Classic Minerals |
GM and Classic Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Classic Minerals
The main advantage of trading using opposite GM and Classic Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Classic Minerals 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 Classic Minerals will offset losses from the drop in Classic Minerals' long position.The idea behind General Motors and Classic Minerals 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.| Classic Minerals vs. Hutchison Telecommunications | Classic Minerals vs. Data3 | Classic Minerals vs. Queste Communications | Classic Minerals vs. Navigator Global Investments |
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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