Correlation Between GM and Silver X

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

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

Diversification Opportunities for GM and Silver X

0.29

Correlation Coefficient

GM  Silver X

Modest diversification

The 3 months correlation between GM and Silver is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Silver X Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver X Mining 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 Silver X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver X Mining has no effect on the direction of GM i.e., GM and Silver X go up and down completely randomly.

Pair Corralation between GM and Silver X

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Silver X. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 2.27 times less risky than Silver X. The stock trades about -0.03 of its potential returns per unit of risk. The Silver X Mining is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Silver X Mining on December 26, 2024 and sell it today you would lose (1.00) from holding Silver X Mining or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

General Motors  vs.  Silver X Mining

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Silver X Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Silver X Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Silver X is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GM and Silver X

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

The idea behind General Motors and Silver X Mining 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.