Correlation Between GM and Eros Resources
Can any of the company-specific risk be diversified away by investing in both GM and Eros Resources 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 Eros Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Eros Resources Corp, you can compare the effects of market volatilities on GM and Eros Resources 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 Eros Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Eros Resources.
Diversification Opportunities for GM and Eros Resources
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Eros is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Eros Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eros Resources Corp 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 Eros Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eros Resources Corp has no effect on the direction of GM i.e., GM and Eros Resources go up and down completely randomly.
Pair Corralation between GM and Eros Resources
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.45 times more return on investment than Eros Resources. However, General Motors is 2.23 times less risky than Eros Resources. It trades about 0.12 of its potential returns per unit of risk. Eros Resources Corp is currently generating about -0.12 per unit of risk. If you would invest 5,197 in General Motors on August 31, 2024 and sell it today you would earn a total of 353.00 from holding General Motors or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Eros Resources Corp
Performance |
| Timeline |
| General Motors |
| Eros Resources Corp |
GM and Eros Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Eros Resources
The main advantage of trading using opposite GM and Eros Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Eros Resources 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 Eros Resources will offset losses from the drop in Eros Resources' long position.The idea behind General Motors and Eros Resources Corp 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.| Eros Resources vs. Solar Alliance Energy | Eros Resources vs. Global X Active | Eros Resources vs. Financial 15 Split | Eros Resources vs. Rubicon Organics |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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