Correlation Between GM and Liberty Gold
Can any of the company-specific risk be diversified away by investing in both GM and Liberty Gold 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 Liberty Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Liberty Gold Corp, you can compare the effects of market volatilities on GM and Liberty Gold 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 Liberty Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Liberty Gold.
Diversification Opportunities for GM and Liberty Gold
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Liberty is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Liberty Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Gold Corp 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 Liberty Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Gold Corp has no effect on the direction of GM i.e., GM and Liberty Gold go up and down completely randomly.
Pair Corralation between GM and Liberty Gold
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.4 times more return on investment than Liberty Gold. However, General Motors is 2.52 times less risky than Liberty Gold. It trades about 0.24 of its potential returns per unit of risk. Liberty Gold Corp is currently generating about -0.11 per unit of risk. If you would invest 5,272 in General Motors on August 25, 2024 and sell it today you would earn a total of 581.00 from holding General Motors or generate 11.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Liberty Gold Corp
Performance |
| Timeline |
| General Motors |
| Liberty Gold Corp |
GM and Liberty Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Liberty Gold
The main advantage of trading using opposite GM and Liberty Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Liberty Gold 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 Liberty Gold will offset losses from the drop in Liberty Gold's long position.The idea behind General Motors and Liberty Gold Corp 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.| Liberty Gold vs. GoGold Resources | Liberty Gold vs. Maple Gold Mines | Liberty Gold vs. Aurion Resources | Liberty Gold vs. Minaurum Gold |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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