Correlation Between GM and Sumitomo Metal
Can any of the company-specific risk be diversified away by investing in both GM and Sumitomo Metal 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 Sumitomo Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Sumitomo Metal Mining, you can compare the effects of market volatilities on GM and Sumitomo Metal 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 Sumitomo Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Sumitomo Metal.
Diversification Opportunities for GM and Sumitomo Metal
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Sumitomo is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sumitomo Metal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Metal 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 Sumitomo Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Metal Mining has no effect on the direction of GM i.e., GM and Sumitomo Metal go up and down completely randomly.
Pair Corralation between GM and Sumitomo Metal
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.05 times more return on investment than Sumitomo Metal. However, GM is 1.05 times more volatile than Sumitomo Metal Mining. It trades about 0.13 of its potential returns per unit of risk. Sumitomo Metal Mining is currently generating about -0.22 per unit of risk. If you would invest 5,154 in General Motors on August 30, 2024 and sell it today you would earn a total of 396.00 from holding General Motors or generate 7.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Sumitomo Metal Mining
Performance |
| Timeline |
| General Motors |
| Sumitomo Metal Mining |
GM and Sumitomo Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Sumitomo Metal
The main advantage of trading using opposite GM and Sumitomo Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Sumitomo Metal 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 Sumitomo Metal will offset losses from the drop in Sumitomo Metal's long position.The idea behind General Motors and Sumitomo Metal 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.| Sumitomo Metal vs. Rockridge Resources | Sumitomo Metal vs. Ameriwest Lithium | Sumitomo Metal vs. Osisko Metals Incorporated | Sumitomo Metal vs. Volt Lithium 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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