Correlation Between GM and Harfang Exploration
Can any of the company-specific risk be diversified away by investing in both GM and Harfang Exploration 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 Harfang Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Harfang Exploration, you can compare the effects of market volatilities on GM and Harfang Exploration 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 Harfang Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Harfang Exploration.
Diversification Opportunities for GM and Harfang Exploration
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and Harfang is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Harfang Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harfang Exploration 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 Harfang Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harfang Exploration has no effect on the direction of GM i.e., GM and Harfang Exploration go up and down completely randomly.
Pair Corralation between GM and Harfang Exploration
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.27 times more return on investment than Harfang Exploration. However, General Motors is 3.75 times less risky than Harfang Exploration. It trades about 0.09 of its potential returns per unit of risk. Harfang Exploration is currently generating about 0.0 per unit of risk. If you would invest 3,292 in General Motors on August 29, 2024 and sell it today you would earn a total of 2,258 from holding General Motors or generate 68.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Harfang Exploration
Performance |
| Timeline |
| General Motors |
| Harfang Exploration |
GM and Harfang Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Harfang Exploration
The main advantage of trading using opposite GM and Harfang Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Harfang Exploration 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 Harfang Exploration will offset losses from the drop in Harfang Exploration's long position.The idea behind General Motors and Harfang Exploration 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.| Harfang Exploration vs. Rockridge Resources | Harfang Exploration vs. Ameriwest Lithium | Harfang Exploration vs. Osisko Metals Incorporated | Harfang Exploration vs. Volt Lithium 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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