Correlation Between GM and Fjordland Exploration

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

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

Diversification Opportunities for GM and Fjordland Exploration

-0.48

Correlation Coefficient

GM  Fjordland Exploration

Very good diversification

The 3 months correlation between GM and Fjordland is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fjordland Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fjordland Exploration 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 Fjordland Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fjordland Exploration has no effect on the direction of GM i.e., GM and Fjordland Exploration go up and down completely randomly.

Pair Corralation between GM and Fjordland Exploration

If you would invest  1.00  in Fjordland Exploration on October 13, 2024 and sell it today you would earn a total of  0.00  from holding Fjordland Exploration or generate 0.0% 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.  Fjordland Exploration

General Motors

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Fjordland Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fjordland Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fjordland Exploration is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GM and Fjordland Exploration

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

The idea behind General Motors and Fjordland Exploration 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 CEOs Directory module to screen CEOs from public companies around the world.