Correlation Between GM and Mineral

Can any of the company-specific risk be diversified away by investing in both GM and Mineral 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 Mineral into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Mineral Resources 8125, you can compare the effects of market volatilities on GM and Mineral 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 Mineral. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Mineral.

Diversification Opportunities for GM and Mineral

-0.19

Correlation Coefficient

GM  Mineral

Good diversification

The 3 months correlation between GM and Mineral is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mineral Resources 8125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mineral Resources 8125 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 Mineral. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mineral Resources 8125 has no effect on the direction of GM i.e., GM and Mineral go up and down completely randomly.

Pair Corralation between GM and Mineral

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Mineral. In addition to that, GM is 2.85 times more volatile than Mineral Resources 8125. It trades about -0.13 of its total potential returns per unit of risk. Mineral Resources 8125 is currently generating about 0.08 per unit of volatility. If you would invest  10,038  in Mineral Resources 8125 on September 16, 2024 and sell it today you would earn a total of  155.00  from holding Mineral Resources 8125 or generate 1.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Mineral Resources 8125

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Mineral Resources 8125

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mineral Resources 8125 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mineral is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Mineral

The main advantage of trading using opposite GM and Mineral positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Mineral 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 Mineral will offset losses from the drop in Mineral's long position.

The idea behind General Motors and Mineral Resources 8125 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.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.