Correlation Between GM and Northwest Copper
Can any of the company-specific risk be diversified away by investing in both GM and Northwest 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 Northwest 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 Northwest Copper Corp, you can compare the effects of market volatilities on GM and Northwest 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 Northwest Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Northwest Copper.
Diversification Opportunities for GM and Northwest Copper
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Northwest is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Northwest Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Copper Corp 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 Northwest Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Copper Corp has no effect on the direction of GM i.e., GM and Northwest Copper go up and down completely randomly.
Pair Corralation between GM and Northwest Copper
Allowing for the 90-day total investment horizon GM is expected to generate 2.71 times less return on investment than Northwest Copper. But when comparing it to its historical volatility, General Motors is 3.19 times less risky than Northwest Copper. It trades about 0.03 of its potential returns per unit of risk. Northwest Copper Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 26.00 in Northwest Copper Corp on November 19, 2024 and sell it today you would lose (2.00) from holding Northwest Copper Corp or give up 7.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.99% |
| Values | Daily Returns |
General Motors vs. Northwest Copper Corp
Performance |
| Timeline |
| General Motors |
| Northwest Copper Corp |
GM and Northwest Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Northwest Copper
The main advantage of trading using opposite GM and Northwest Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Northwest 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 Northwest Copper will offset losses from the drop in Northwest Copper's long position.The idea behind General Motors and Northwest Copper Corp 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.| Northwest Copper vs. Surge Copper Corp | Northwest Copper vs. Kodiak Copper Corp | Northwest Copper vs. QC Copper and | Northwest Copper vs. Libero Copper 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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