Correlation Between GM and Fredonia Mining
Can any of the company-specific risk be diversified away by investing in both GM and Fredonia 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 Fredonia 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 Fredonia Mining, you can compare the effects of market volatilities on GM and Fredonia 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 Fredonia Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fredonia Mining.
Diversification Opportunities for GM and Fredonia Mining
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Fredonia is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fredonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fredonia 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 Fredonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fredonia Mining has no effect on the direction of GM i.e., GM and Fredonia Mining go up and down completely randomly.
Pair Corralation between GM and Fredonia Mining
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.33 times more return on investment than Fredonia Mining. However, General Motors is 3.01 times less risky than Fredonia Mining. It trades about -0.11 of its potential returns per unit of risk. Fredonia Mining is currently generating about -0.16 per unit of risk. If you would invest 5,555 in General Motors on September 22, 2024 and sell it today you would lose (374.00) from holding General Motors or give up 6.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Fredonia Mining
Performance |
| Timeline |
| General Motors |
| Fredonia Mining |
GM and Fredonia Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Fredonia Mining
The main advantage of trading using opposite GM and Fredonia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Fredonia 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 Fredonia Mining will offset losses from the drop in Fredonia Mining's long position.The idea behind General Motors and Fredonia 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.| Fredonia Mining vs. Canso Select Opportunities | Fredonia Mining vs. Exco Technologies Limited | Fredonia Mining vs. Precious Metals And | Fredonia Mining vs. Lion One Metals |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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