Correlation Between GM and Newcore Gold

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Can any of the company-specific risk be diversified away by investing in both GM and Newcore 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 Newcore 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 Newcore Gold, you can compare the effects of market volatilities on GM and Newcore 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 Newcore Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Newcore Gold.

Diversification Opportunities for GM and Newcore Gold

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between GM and Newcore is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Newcore Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newcore Gold 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 Newcore Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newcore Gold has no effect on the direction of GM i.e., GM and Newcore Gold go up and down completely randomly.

Pair Corralation between GM and Newcore Gold

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.82 times more return on investment than Newcore Gold. However, General Motors is 1.21 times less risky than Newcore Gold. It trades about 0.12 of its potential returns per unit of risk. Newcore Gold is currently generating about -0.18 per unit of risk. If you would invest  5,197  in General Motors on August 31, 2024 and sell it today you would earn a total of  353.00  from holding General Motors or generate 6.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Newcore Gold

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.
Newcore Gold 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Newcore Gold are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Newcore Gold may actually be approaching a critical reversion point that can send shares even higher in December 2024.

GM and Newcore Gold Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Newcore Gold

The main advantage of trading using opposite GM and Newcore Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Newcore 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 Newcore Gold will offset losses from the drop in Newcore Gold's long position.
The idea behind General Motors and Newcore Gold 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.
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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 Transaction History module to view history of all your transactions and understand their impact on performance.

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