Correlation Between GM and Silver Range
Can any of the company-specific risk be diversified away by investing in both GM and Silver Range 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 Silver Range into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Silver Range Resources, you can compare the effects of market volatilities on GM and Silver Range 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 Silver Range. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Silver Range.
Diversification Opportunities for GM and Silver Range
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Silver is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Silver Range Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Range Resources 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 Silver Range. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Range Resources has no effect on the direction of GM i.e., GM and Silver Range go up and down completely randomly.
Pair Corralation between GM and Silver Range
Allowing for the 90-day total investment horizon GM is expected to generate 54.69 times less return on investment than Silver Range. But when comparing it to its historical volatility, General Motors is 34.84 times less risky than Silver Range. It trades about 0.08 of its potential returns per unit of risk. Silver Range Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 7.00 in Silver Range Resources on September 1, 2024 and sell it today you would lose (2.00) from holding Silver Range Resources or give up 28.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Silver Range Resources
Performance |
| Timeline |
| General Motors |
| Silver Range Resources |
GM and Silver Range Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Silver Range
The main advantage of trading using opposite GM and Silver Range positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Silver Range 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 Silver Range will offset losses from the drop in Silver Range's long position.The idea behind General Motors and Silver Range Resources 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.| Silver Range vs. SilverCrest Metals | Silver Range vs. Gatos Silver | Silver Range vs. Vox Royalty Corp | Silver Range vs. Metalla Royalty Streaming |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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