Correlation Between GM and Sprott Gold
Can any of the company-specific risk be diversified away by investing in both GM and Sprott 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 Sprott 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 Sprott Gold Miners, you can compare the effects of market volatilities on GM and Sprott 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 Sprott Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Sprott Gold.
Diversification Opportunities for GM and Sprott Gold
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Sprott is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sprott Gold Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Gold Miners 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 Sprott Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Gold Miners has no effect on the direction of GM i.e., GM and Sprott Gold go up and down completely randomly.
Pair Corralation between GM and Sprott Gold
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.05 times more return on investment than Sprott Gold. However, GM is 1.05 times more volatile than Sprott Gold Miners. It trades about 0.15 of its potential returns per unit of risk. Sprott Gold Miners is currently generating about 0.05 per unit of risk. If you would invest 2,858 in General Motors on August 24, 2024 and sell it today you would earn a total of 2,990 from holding General Motors or generate 104.6% 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. Sprott Gold Miners
Performance |
| Timeline |
| General Motors |
| Sprott Gold Miners |
GM and Sprott Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Sprott Gold
The main advantage of trading using opposite GM and Sprott Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Sprott 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 Sprott Gold will offset losses from the drop in Sprott Gold's long position.The idea behind General Motors and Sprott Gold Miners 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.| Sprott Gold vs. Sprott Junior Gold | Sprott Gold vs. iShares MSCI Global | Sprott Gold vs. US Global GO | Sprott Gold vs. Sprott Physical Gold |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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