Correlation Between GM and Solaris Oilfield
Can any of the company-specific risk be diversified away by investing in both GM and Solaris Oilfield 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 Solaris Oilfield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Solaris Oilfield Infrastructure, you can compare the effects of market volatilities on GM and Solaris Oilfield 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 Solaris Oilfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Solaris Oilfield.
Diversification Opportunities for GM and Solaris Oilfield
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Solaris is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Solaris Oilfield Infrastructur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solaris Oilfield Inf 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 Solaris Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solaris Oilfield Inf has no effect on the direction of GM i.e., GM and Solaris Oilfield go up and down completely randomly.
Pair Corralation between GM and Solaris Oilfield
Allowing for the 90-day total investment horizon GM is expected to generate 1.15 times less return on investment than Solaris Oilfield. But when comparing it to its historical volatility, General Motors is 1.64 times less risky than Solaris Oilfield. It trades about 0.07 of its potential returns per unit of risk. Solaris Oilfield Infrastructure is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 804.00 in Solaris Oilfield Infrastructure on August 31, 2024 and sell it today you would earn a total of 348.00 from holding Solaris Oilfield Infrastructure or generate 43.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 85.29% |
| Values | Daily Returns |
General Motors vs. Solaris Oilfield Infrastructur
Performance |
| Timeline |
| General Motors |
| Solaris Oilfield Inf |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Solaris Oilfield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Solaris Oilfield
The main advantage of trading using opposite GM and Solaris Oilfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Solaris Oilfield 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 Solaris Oilfield will offset losses from the drop in Solaris Oilfield's long position.The idea behind General Motors and Solaris Oilfield Infrastructure 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.| Solaris Oilfield vs. Archrock | Solaris Oilfield vs. Newpark Resources | Solaris Oilfield vs. Bristow Group | Solaris Oilfield vs. MRC Global |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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