Correlation Between GM and DB Physical
Can any of the company-specific risk be diversified away by investing in both GM and DB Physical 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 DB Physical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and DB Physical Gold, you can compare the effects of market volatilities on GM and DB Physical 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 DB Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and DB Physical.
Diversification Opportunities for GM and DB Physical
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and XGLS is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and DB Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Physical Gold 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 DB Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Physical Gold has no effect on the direction of GM i.e., GM and DB Physical go up and down completely randomly.
Pair Corralation between GM and DB Physical
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.49 times more return on investment than DB Physical. However, GM is 2.49 times more volatile than DB Physical Gold. It trades about 0.08 of its potential returns per unit of risk. DB Physical Gold is currently generating about 0.1 per unit of risk. If you would invest 4,539 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,020 from holding General Motors or generate 22.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.66% |
| Values | Daily Returns |
General Motors vs. DB Physical Gold
Performance |
| Timeline |
| General Motors |
| DB Physical Gold |
GM and DB Physical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and DB Physical
The main advantage of trading using opposite GM and DB Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, DB Physical 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 DB Physical will offset losses from the drop in DB Physical's long position.The idea behind General Motors and DB Physical Gold 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.| DB Physical vs. Wheaton Precious Metals | DB Physical vs. Gaztransport et Technigaz | DB Physical vs. Norman Broadbent Plc | DB Physical vs. SilverCrest Metals |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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