Correlation Between GM and Balkan Mining

Can any of the company-specific risk be diversified away by investing in both GM and Balkan 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 Balkan 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 Balkan Mining and, you can compare the effects of market volatilities on GM and Balkan 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 Balkan Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Balkan Mining.

Diversification Opportunities for GM and Balkan Mining

0.0

Correlation Coefficient

GM  Balkan Mining

Pay attention - limited upside

The 3 months correlation between GM and Balkan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Balkan Mining and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balkan 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 Balkan Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balkan Mining has no effect on the direction of GM i.e., GM and Balkan Mining go up and down completely randomly.

Pair Corralation between GM and Balkan Mining

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.74 times more return on investment than Balkan Mining. However, General Motors is 1.36 times less risky than Balkan Mining. It trades about -0.01 of its potential returns per unit of risk. Balkan Mining and is currently generating about -0.03 per unit of risk. If you would invest  5,021  in General Motors on December 19, 2024 and sell it today you would lose (154.00) from holding General Motors or give up 3.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

General Motors  vs.  Balkan Mining and

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.

Balkan Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Balkan Mining and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with GM and Balkan Mining

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

The idea behind General Motors and Balkan Mining and 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.