Correlation Between GM and Rand Mining
Can any of the company-specific risk be diversified away by investing in both GM and Rand 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 Rand 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 Rand Mining, you can compare the effects of market volatilities on GM and Rand 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 Rand Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Rand Mining.
Diversification Opportunities for GM and Rand Mining
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and Rand is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Rand Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rand 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 Rand Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rand Mining has no effect on the direction of GM i.e., GM and Rand Mining go up and down completely randomly.
Pair Corralation between GM and Rand Mining
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.72 times more return on investment than Rand Mining. However, General Motors is 1.39 times less risky than Rand Mining. It trades about -0.13 of its potential returns per unit of risk. Rand Mining is currently generating about -0.15 per unit of risk. If you would invest 6,006 in General Motors on October 25, 2024 and sell it today you would lose (730.00) from holding General Motors or give up 12.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.5% |
| Values | Daily Returns |
General Motors vs. Rand Mining
Performance |
| Timeline |
| General Motors |
| Rand Mining |
GM and Rand Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Rand Mining
The main advantage of trading using opposite GM and Rand Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Rand 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 Rand Mining will offset losses from the drop in Rand Mining's long position.The idea behind General Motors and Rand 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.| Rand Mining vs. Group 6 Metals | Rand Mining vs. Sports Entertainment Group | Rand Mining vs. Australian Unity Office | Rand Mining vs. Land Homes Group |
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.
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