Correlation Between GM and Centerra Gold

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

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

Diversification Opportunities for GM and Centerra Gold

-0.35

Correlation Coefficient

GM  Centerra Gold

Very good diversification

The 3 months correlation between GM and Centerra is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Centerra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerra 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 Centerra Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerra Gold has no effect on the direction of GM i.e., GM and Centerra Gold go up and down completely randomly.

Pair Corralation between GM and Centerra Gold

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Centerra Gold. In addition to that, GM is 1.17 times more volatile than Centerra Gold. It trades about -0.07 of its total potential returns per unit of risk. Centerra Gold is currently generating about 0.1 per unit of volatility. If you would invest  808.00  in Centerra Gold on December 27, 2024 and sell it today you would earn a total of  110.00  from holding Centerra Gold or generate 13.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

General Motors  vs.  Centerra Gold

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Centerra Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centerra Gold are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Centerra Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Centerra Gold

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

The idea behind General Motors and Centerra 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.