Correlation Between GM and Madhav Copper
Can any of the company-specific risk be diversified away by investing in both GM and Madhav Copper 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 Madhav Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Madhav Copper Limited, you can compare the effects of market volatilities on GM and Madhav Copper 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 Madhav Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Madhav Copper.
Diversification Opportunities for GM and Madhav Copper
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Madhav is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Madhav Copper Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madhav Copper Limited 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 Madhav Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madhav Copper Limited has no effect on the direction of GM i.e., GM and Madhav Copper go up and down completely randomly.
Pair Corralation between GM and Madhav Copper
Allowing for the 90-day total investment horizon GM is expected to generate 2.18 times less return on investment than Madhav Copper. But when comparing it to its historical volatility, General Motors is 1.3 times less risky than Madhav Copper. It trades about 0.09 of its potential returns per unit of risk. Madhav Copper Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,796 in Madhav Copper Limited on August 29, 2024 and sell it today you would earn a total of 448.00 from holding Madhav Copper Limited or generate 11.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. Madhav Copper Limited
Performance |
| Timeline |
| General Motors |
| Madhav Copper Limited |
GM and Madhav Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Madhav Copper
The main advantage of trading using opposite GM and Madhav Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Madhav Copper 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 Madhav Copper will offset losses from the drop in Madhav Copper's long position.The idea behind General Motors and Madhav Copper Limited 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.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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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