Correlation Between GM and Mirasol Resources

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Can any of the company-specific risk be diversified away by investing in both GM and Mirasol Resources 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 Mirasol Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Mirasol Resources, you can compare the effects of market volatilities on GM and Mirasol Resources 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 Mirasol Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Mirasol Resources.

Diversification Opportunities for GM and Mirasol Resources

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between GM and Mirasol is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mirasol Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mirasol Resources 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 Mirasol Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mirasol Resources has no effect on the direction of GM i.e., GM and Mirasol Resources go up and down completely randomly.

Pair Corralation between GM and Mirasol Resources

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.5 times more return on investment than Mirasol Resources. However, General Motors is 2.0 times less risky than Mirasol Resources. It trades about 0.07 of its potential returns per unit of risk. Mirasol Resources is currently generating about -0.03 per unit of risk. If you would invest  3,292  in General Motors on September 11, 2024 and sell it today you would earn a total of  1,979  from holding General Motors or generate 60.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Mirasol Resources

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.
Mirasol Resources 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Mirasol Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Mirasol Resources showed solid returns over the last few months and may actually be approaching a breakup point.

GM and Mirasol Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Mirasol Resources

The main advantage of trading using opposite GM and Mirasol Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Mirasol Resources 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 Mirasol Resources will offset losses from the drop in Mirasol Resources' long position.
The idea behind General Motors and Mirasol Resources 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.
Check out your portfolio center.
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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