Correlation Between GM and Fresnillo PLC
Can any of the company-specific risk be diversified away by investing in both GM and Fresnillo PLC 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 Fresnillo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Fresnillo PLC, you can compare the effects of market volatilities on GM and Fresnillo PLC 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 Fresnillo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fresnillo PLC.
Diversification Opportunities for GM and Fresnillo PLC
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Fresnillo is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fresnillo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresnillo PLC 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 Fresnillo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresnillo PLC has no effect on the direction of GM i.e., GM and Fresnillo PLC go up and down completely randomly.
Pair Corralation between GM and Fresnillo PLC
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.96 times more return on investment than Fresnillo PLC. However, General Motors is 1.05 times less risky than Fresnillo PLC. It trades about 0.17 of its potential returns per unit of risk. Fresnillo PLC is currently generating about -0.21 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Fresnillo PLC
Performance |
| Timeline |
| General Motors |
| Fresnillo PLC |
GM and Fresnillo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Fresnillo PLC
The main advantage of trading using opposite GM and Fresnillo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Fresnillo PLC 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 Fresnillo PLC will offset losses from the drop in Fresnillo PLC's long position.The idea behind General Motors and Fresnillo PLC 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.| Fresnillo PLC vs. Defiance Silver Corp | Fresnillo PLC vs. HUMANA INC | Fresnillo PLC vs. SCOR PK | Fresnillo PLC vs. Aquagold International |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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