Correlation Between GM and Gold Portfolio
Can any of the company-specific risk be diversified away by investing in both GM and Gold Portfolio 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 Gold Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Gold Portfolio Gold, you can compare the effects of market volatilities on GM and Gold Portfolio 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 Gold Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Gold Portfolio.
Diversification Opportunities for GM and Gold Portfolio
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Gold is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Gold Portfolio Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Portfolio Gold 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 Gold Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Portfolio Gold has no effect on the direction of GM i.e., GM and Gold Portfolio go up and down completely randomly.
Pair Corralation between GM and Gold Portfolio
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.27 times more return on investment than Gold Portfolio. However, GM is 1.27 times more volatile than Gold Portfolio Gold. It trades about 0.03 of its potential returns per unit of risk. Gold Portfolio Gold is currently generating about -0.05 per unit of risk. If you would invest 5,261 in General Motors on October 26, 2024 and sell it today you would earn a total of 161.00 from holding General Motors or generate 3.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Gold Portfolio Gold
Performance |
| Timeline |
| General Motors |
| Gold Portfolio Gold |
GM and Gold Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Gold Portfolio
The main advantage of trading using opposite GM and Gold Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Gold Portfolio 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 Gold Portfolio will offset losses from the drop in Gold Portfolio's long position.The idea behind General Motors and Gold Portfolio Gold 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.| Gold Portfolio vs. Fidelity Select Portfolios | Gold Portfolio vs. Fidelity Natural Resources | Gold Portfolio vs. Materials Portfolio Materials | Gold Portfolio vs. Banking Portfolio Banking |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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