Correlation Between GM and Norden Crown

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

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

Diversification Opportunities for GM and Norden Crown

-0.38

Correlation Coefficient

GM  Norden Crown

Very good diversification

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

Pair Corralation between GM and Norden Crown

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Norden Crown. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 4.01 times less risky than Norden Crown. The stock trades about -0.01 of its potential returns per unit of risk. The Norden Crown Metals is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Norden Crown Metals on December 19, 2024 and sell it today you would earn a total of  4.00  from holding Norden Crown Metals or generate 80.0% return on investment over 90 days.

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

General Motors  vs.  Norden Crown Metals

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.

Norden Crown Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Norden Crown Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Norden Crown showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Norden Crown

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

The idea behind General Motors and Norden Crown Metals 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.