Correlation Between GM and Stamper Oil
Can any of the company-specific risk be diversified away by investing in both GM and Stamper Oil 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 Stamper Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Stamper Oil Gas, you can compare the effects of market volatilities on GM and Stamper Oil 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 Stamper Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Stamper Oil.
Diversification Opportunities for GM and Stamper Oil
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Stamper is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Stamper Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stamper Oil Gas 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 Stamper Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stamper Oil Gas has no effect on the direction of GM i.e., GM and Stamper Oil go up and down completely randomly.
Pair Corralation between GM and Stamper Oil
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Stamper Oil. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 2.36 times less risky than Stamper Oil. The stock trades about -0.07 of its potential returns per unit of risk. The Stamper Oil Gas is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1.00 in Stamper Oil Gas on September 27, 2024 and sell it today you would earn a total of 0.00 from holding Stamper Oil Gas or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Stamper Oil Gas
Performance |
| Timeline |
| General Motors |
| Stamper Oil Gas |
GM and Stamper Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Stamper Oil
The main advantage of trading using opposite GM and Stamper Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Stamper Oil 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 Stamper Oil will offset losses from the drop in Stamper Oil's long position.The idea behind General Motors and Stamper Oil Gas 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.| Stamper Oil vs. East West Petroleum | Stamper Oil vs. Valeura Energy | Stamper Oil vs. Invictus Energy Limited | Stamper Oil vs. Africa Oil 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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