Correlation Between GM and Ridgestone Mining
Can any of the company-specific risk be diversified away by investing in both GM and Ridgestone 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 Ridgestone 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 Ridgestone Mining, you can compare the effects of market volatilities on GM and Ridgestone 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 Ridgestone Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Ridgestone Mining.
Diversification Opportunities for GM and Ridgestone Mining
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Ridgestone is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ridgestone Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ridgestone 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 Ridgestone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ridgestone Mining has no effect on the direction of GM i.e., GM and Ridgestone Mining go up and down completely randomly.
Pair Corralation between GM and Ridgestone Mining
Allowing for the 90-day total investment horizon GM is expected to generate 2.5 times less return on investment than Ridgestone Mining. But when comparing it to its historical volatility, General Motors is 2.88 times less risky than Ridgestone Mining. It trades about 0.07 of its potential returns per unit of risk. Ridgestone Mining is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5.80 in Ridgestone Mining on August 29, 2024 and sell it today you would earn a total of 0.30 from holding Ridgestone Mining or generate 5.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Ridgestone Mining
Performance |
| Timeline |
| General Motors |
| Ridgestone Mining |
GM and Ridgestone Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Ridgestone Mining
The main advantage of trading using opposite GM and Ridgestone Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Ridgestone 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 Ridgestone Mining will offset losses from the drop in Ridgestone Mining's long position.The idea behind General Motors and Ridgestone 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.| Ridgestone Mining vs. ZincX Resources Corp | Ridgestone Mining vs. Strategic Resources | Ridgestone Mining vs. Nuinsco Resources Limited | Ridgestone Mining vs. Qubec Nickel 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |