Correlation Between GM and Monument Mining
Can any of the company-specific risk be diversified away by investing in both GM and Monument Mining 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 Monument Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Monument Mining Limited, you can compare the effects of market volatilities on GM and Monument Mining 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 Monument Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Monument Mining.
Diversification Opportunities for GM and Monument Mining
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Monument is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Monument Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monument Mining 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 Monument Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monument Mining has no effect on the direction of GM i.e., GM and Monument Mining go up and down completely randomly.
Pair Corralation between GM and Monument Mining
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Monument Mining. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.61 times less risky than Monument Mining. The stock trades about -0.06 of its potential returns per unit of risk. The Monument Mining Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 18.00 in Monument Mining Limited on November 4, 2024 and sell it today you would earn a total of 4.00 from holding Monument Mining Limited or generate 22.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
General Motors vs. Monument Mining Limited
Performance |
| Timeline |
| General Motors |
| Monument Mining |
GM and Monument Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Monument Mining
The main advantage of trading using opposite GM and Monument Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Monument Mining 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 Monument Mining will offset losses from the drop in Monument Mining's long position.The idea behind General Motors and Monument Mining Limited 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.| Monument Mining vs. SALESFORCE INC CDR | Monument Mining vs. CHINA EDUCATION GROUP | Monument Mining vs. TRADEGATE | Monument Mining vs. CANON MARKETING JP |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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