Correlation Between GM and Diamcor Mining
Can any of the company-specific risk be diversified away by investing in both GM and Diamcor 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 Diamcor 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 Diamcor Mining, you can compare the effects of market volatilities on GM and Diamcor 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 Diamcor Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Diamcor Mining.
Diversification Opportunities for GM and Diamcor Mining
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Diamcor is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Diamcor Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamcor 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 Diamcor Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamcor Mining has no effect on the direction of GM i.e., GM and Diamcor Mining go up and down completely randomly.
Pair Corralation between GM and Diamcor Mining
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.25 times more return on investment than Diamcor Mining. However, General Motors is 4.0 times less risky than Diamcor Mining. It trades about 0.08 of its potential returns per unit of risk. Diamcor Mining is currently generating about -0.01 per unit of risk. If you would invest 4,551 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,008 from holding General Motors or generate 22.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Diamcor Mining
Performance |
| Timeline |
| General Motors |
| Diamcor Mining |
GM and Diamcor Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Diamcor Mining
The main advantage of trading using opposite GM and Diamcor Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Diamcor 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 Diamcor Mining will offset losses from the drop in Diamcor Mining's long position.The idea behind General Motors and Diamcor Mining 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.| Diamcor Mining vs. New Pacific Metals | Diamcor Mining vs. Star Royalties | Diamcor Mining vs. Teuton Resources 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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