Correlation Between GM and Eco Atlantic
Can any of the company-specific risk be diversified away by investing in both GM and Eco Atlantic 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 Eco Atlantic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Eco Atlantic Oil, you can compare the effects of market volatilities on GM and Eco Atlantic 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 Eco Atlantic. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Eco Atlantic.
Diversification Opportunities for GM and Eco Atlantic
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Eco is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Eco Atlantic Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Atlantic Oil 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 Eco Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Atlantic Oil has no effect on the direction of GM i.e., GM and Eco Atlantic go up and down completely randomly.
Pair Corralation between GM and Eco Atlantic
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.9 times more return on investment than Eco Atlantic. However, General Motors is 1.11 times less risky than Eco Atlantic. It trades about 0.14 of its potential returns per unit of risk. Eco Atlantic Oil is currently generating about -0.07 per unit of risk. If you would invest 5,180 in General Motors on September 3, 2024 and sell it today you would earn a total of 379.00 from holding General Motors or generate 7.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
General Motors vs. Eco Atlantic Oil
Performance |
| Timeline |
| General Motors |
| Eco Atlantic Oil |
GM and Eco Atlantic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Eco Atlantic
The main advantage of trading using opposite GM and Eco Atlantic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Eco Atlantic 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 Eco Atlantic will offset losses from the drop in Eco Atlantic's long position.The idea behind General Motors and Eco Atlantic Oil 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.| Eco Atlantic vs. CGX Energy | Eco Atlantic vs. Africa Oil Corp | Eco Atlantic vs. Africa Energy Corp | Eco Atlantic vs. Valeura Energy |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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