Correlation Between GM and Aris Mining

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

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

Diversification Opportunities for GM and Aris Mining

-0.49

Correlation Coefficient

GM  Aris Mining

Very good diversification

The 3 months correlation between GM and Aris is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Aris Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aris 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 Aris Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aris Mining has no effect on the direction of GM i.e., GM and Aris Mining go up and down completely randomly.

Pair Corralation between GM and Aris Mining

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Aris Mining. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.2 times less risky than Aris Mining. The stock trades about -0.02 of its potential returns per unit of risk. The Aris Mining is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  349.00  in Aris Mining on December 22, 2024 and sell it today you would earn a total of  85.00  from holding Aris Mining or generate 24.36% return on investment over 90 days.

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

General Motors  vs.  Aris 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.

Aris Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, Aris Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Aris Mining

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

The idea behind General Motors and Aris 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.