Correlation Between GM and North Bay
Can any of the company-specific risk be diversified away by investing in both GM and North Bay 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 North Bay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and North Bay Resources, you can compare the effects of market volatilities on GM and North Bay 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 North Bay. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and North Bay.
Diversification Opportunities for GM and North Bay
Good diversification
The 3 months correlation between GM and North is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and North Bay Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Bay Resources 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 North Bay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Bay Resources has no effect on the direction of GM i.e., GM and North Bay go up and down completely randomly.
Pair Corralation between GM and North Bay
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.31 times more return on investment than North Bay. However, General Motors is 3.26 times less risky than North Bay. It trades about -0.08 of its potential returns per unit of risk. North Bay Resources is currently generating about -0.1 per unit of risk. If you would invest 4,836 in General Motors on January 4, 2025 and sell it today you would lose (246.00) from holding General Motors or give up 5.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. North Bay Resources
Performance |
| Timeline |
| General Motors |
| North Bay Resources |
GM and North Bay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and North Bay
The main advantage of trading using opposite GM and North Bay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, North Bay 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 North Bay will offset losses from the drop in North Bay's long position.The idea behind General Motors and North Bay Resources 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.| North Bay vs. Diamond Fields Resources | North Bay vs. EnviroGold Global Limited | North Bay vs. Gemfields Group Limited | North Bay vs. Pacific Ridge Exploration |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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