Correlation Between GM and Soma Gold
Can any of the company-specific risk be diversified away by investing in both GM and Soma 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 Soma 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 Soma Gold Corp, you can compare the effects of market volatilities on GM and Soma 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 Soma Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Soma Gold.
Diversification Opportunities for GM and Soma Gold
Very weak diversification
The 3 months correlation between GM and Soma is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Soma Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soma Gold Corp 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 Soma Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soma Gold Corp has no effect on the direction of GM i.e., GM and Soma Gold go up and down completely randomly.
Pair Corralation between GM and Soma Gold
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.68 times more return on investment than Soma Gold. However, General Motors is 1.47 times less risky than Soma Gold. It trades about -0.08 of its potential returns per unit of risk. Soma Gold Corp is currently generating about -0.15 per unit of risk. If you would invest 5,475 in General Motors on September 21, 2024 and sell it today you would lose (294.00) from holding General Motors or give up 5.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. Soma Gold Corp
Performance |
| Timeline |
| General Motors |
| Soma Gold Corp |
GM and Soma Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Soma Gold
The main advantage of trading using opposite GM and Soma Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Soma 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 Soma Gold will offset losses from the drop in Soma Gold's long position.The idea behind General Motors and Soma Gold Corp 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.| Soma Gold vs. Revival Gold | Soma Gold vs. Outcrop Gold Corp | Soma Gold vs. Scottie Resources Corp | Soma Gold vs. Royal Road Minerals |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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