Correlation Between GM and Golden Agri-Resources
Can any of the company-specific risk be diversified away by investing in both GM and Golden Agri-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 Golden Agri-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 Golden Agri Resources, you can compare the effects of market volatilities on GM and Golden Agri-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 Golden Agri-Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Golden Agri-Resources.
Diversification Opportunities for GM and Golden Agri-Resources
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Golden is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Golden Agri Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Agri Resources 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 Golden Agri-Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Agri Resources has no effect on the direction of GM i.e., GM and Golden Agri-Resources go up and down completely randomly.
Pair Corralation between GM and Golden Agri-Resources
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.26 times more return on investment than Golden Agri-Resources. However, GM is 1.26 times more volatile than Golden Agri Resources. It trades about 0.07 of its potential returns per unit of risk. Golden Agri Resources is currently generating about 0.01 per unit of risk. If you would invest 3,536 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,023 from holding General Motors or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 68.98% |
| Values | Daily Returns |
General Motors vs. Golden Agri Resources
Performance |
| Timeline |
| General Motors |
| Golden Agri Resources |
GM and Golden Agri-Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Golden Agri-Resources
The main advantage of trading using opposite GM and Golden Agri-Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Golden Agri-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 Golden Agri-Resources will offset losses from the drop in Golden Agri-Resources' long position.The idea behind General Motors and Golden Agri Resources 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.| Golden Agri-Resources vs. Global Clean Energy | Golden Agri-Resources vs. Edible Garden AG | Golden Agri-Resources vs. Local Bounti Corp | Golden Agri-Resources vs. Village Farms 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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