Correlation Between GM and International Metals
Can any of the company-specific risk be diversified away by investing in both GM and International Metals 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 International Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and International Metals Mining, you can compare the effects of market volatilities on GM and International Metals 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 International Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and International Metals.
Diversification Opportunities for GM and International Metals
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and International is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and International Metals Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Metals 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 International Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Metals has no effect on the direction of GM i.e., GM and International Metals go up and down completely randomly.
Pair Corralation between GM and International Metals
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the International Metals. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 2.01 times less risky than International Metals. The stock trades about -0.31 of its potential returns per unit of risk. The International Metals Mining is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 8.00 in International Metals Mining on September 24, 2024 and sell it today you would lose (1.00) from holding International Metals Mining or give up 12.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
General Motors vs. International Metals Mining
Performance |
| Timeline |
| General Motors |
| International Metals |
GM and International Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and International Metals
The main advantage of trading using opposite GM and International Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, International Metals 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 International Metals will offset losses from the drop in International Metals' long position.The idea behind General Motors and International Metals 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.| International Metals vs. 2028 Investment Grade | International Metals vs. NeuPath Health | International Metals vs. Constellation Software | International Metals vs. Sparx Technology |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
Other Complementary Tools
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |