Correlation Between GM and Magna Mining
Can any of the company-specific risk be diversified away by investing in both GM and Magna Mining 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 Magna Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Magna Mining, you can compare the effects of market volatilities on GM and Magna Mining 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 Magna Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Magna Mining.
Diversification Opportunities for GM and Magna Mining
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Magna is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Magna Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna Mining 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 Magna Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna Mining has no effect on the direction of GM i.e., GM and Magna Mining go up and down completely randomly.
Pair Corralation between GM and Magna Mining
Allowing for the 90-day total investment horizon GM is expected to generate 2.71 times less return on investment than Magna Mining. But when comparing it to its historical volatility, General Motors is 1.36 times less risky than Magna Mining. It trades about 0.17 of its potential returns per unit of risk. Magna Mining is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 112.00 in Magna Mining on September 1, 2024 and sell it today you would earn a total of 34.00 from holding Magna Mining or generate 30.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Magna Mining
Performance |
| Timeline |
| General Motors |
| Magna Mining |
GM and Magna Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Magna Mining
The main advantage of trading using opposite GM and Magna Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Magna Mining 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 Magna Mining will offset losses from the drop in Magna Mining's long position.The idea behind General Motors and Magna Mining 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.| Magna Mining vs. Kiplin Metals | Magna Mining vs. Pure Energy Minerals | Magna Mining vs. Noram Lithium Corp | Magna Mining vs. Minnova 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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