Correlation Between GM and Mineral Res
Can any of the company-specific risk be diversified away by investing in both GM and Mineral Res 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 Mineral Res into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Mineral Res, you can compare the effects of market volatilities on GM and Mineral Res 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 Mineral Res. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Mineral Res.
Diversification Opportunities for GM and Mineral Res
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Mineral is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mineral Res in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mineral Res 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 Mineral Res. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mineral Res has no effect on the direction of GM i.e., GM and Mineral Res go up and down completely randomly.
Pair Corralation between GM and Mineral Res
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.58 times more return on investment than Mineral Res. However, General Motors is 1.72 times less risky than Mineral Res. It trades about 0.07 of its potential returns per unit of risk. Mineral Res is currently generating about -0.04 per unit of risk. If you would invest 3,574 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,985 from holding General Motors or generate 55.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.46% |
| Values | Daily Returns |
General Motors vs. Mineral Res
Performance |
| Timeline |
| General Motors |
| Mineral Res |
GM and Mineral Res Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Mineral Res
The main advantage of trading using opposite GM and Mineral Res positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Mineral Res 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 Mineral Res will offset losses from the drop in Mineral Res' long position.The idea behind General Motors and Mineral Res 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.| Mineral Res vs. IGO Limited | Mineral Res vs. Grid Metals Corp | Mineral Res vs. First American Silver | Mineral Res vs. Qubec Nickel 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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