Correlation Between GM and Gulfport Energy
Can any of the company-specific risk be diversified away by investing in both GM and Gulfport Energy 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 Gulfport Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Gulfport Energy Operating, you can compare the effects of market volatilities on GM and Gulfport Energy 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 Gulfport Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Gulfport Energy.
Diversification Opportunities for GM and Gulfport Energy
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Gulfport is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Gulfport Energy Operating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulfport Energy Operating 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 Gulfport Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulfport Energy Operating has no effect on the direction of GM i.e., GM and Gulfport Energy go up and down completely randomly.
Pair Corralation between GM and Gulfport Energy
Allowing for the 90-day total investment horizon GM is expected to generate 2.29 times less return on investment than Gulfport Energy. But when comparing it to its historical volatility, General Motors is 1.0 times less risky than Gulfport Energy. It trades about 0.05 of its potential returns per unit of risk. Gulfport Energy Operating is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 7,369 in Gulfport Energy Operating on November 1, 2024 and sell it today you would earn a total of 11,040 from holding Gulfport Energy Operating or generate 149.82% 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. Gulfport Energy Operating
Performance |
| Timeline |
| General Motors |
| Gulfport Energy Operating |
GM and Gulfport Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Gulfport Energy
The main advantage of trading using opposite GM and Gulfport Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Gulfport Energy 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 Gulfport Energy will offset losses from the drop in Gulfport Energy's long position.The idea behind General Motors and Gulfport Energy Operating 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.| Gulfport Energy vs. Epsilon Energy | Gulfport Energy vs. Granite Ridge Resources | Gulfport Energy vs. North European Oil | Gulfport Energy vs. CNX Resources Corp |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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