Correlation Between GM and Leviathan Gold

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

Diversification Opportunities for GM and Leviathan Gold

0.38

Correlation Coefficient

GM  Leviathan Gold

Weak diversification

The 3 months correlation between GM and Leviathan is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Leviathan Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leviathan 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 Leviathan Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leviathan Gold has no effect on the direction of GM i.e., GM and Leviathan Gold go up and down completely randomly.

Pair Corralation between GM and Leviathan Gold

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.23 times more return on investment than Leviathan Gold. However, General Motors is 4.41 times less risky than Leviathan Gold. It trades about 0.04 of its potential returns per unit of risk. Leviathan Gold is currently generating about -0.01 per unit of risk. If you would invest  3,850  in General Motors on October 22, 2024 and sell it today you would earn a total of  1,247  from holding General Motors or generate 32.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

General Motors  vs.  Leviathan Gold

General Motors

Risk-Adjusted Performance

0 of 100

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.

Leviathan Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leviathan Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Leviathan Gold 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 Leviathan Gold

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

The idea behind General Motors and Leviathan 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.