Correlation Between GM and Oppenheimer Gold

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

Diversification Opportunities for GM and Oppenheimer Gold

-0.68

Correlation Coefficient

GM  Oppenheimer Gold

Excellent diversification

The 3 months correlation between GM and Oppenheimer is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Oppenheimer Gold Spec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oppenheimer Gold Spec 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 Oppenheimer Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oppenheimer Gold Spec has no effect on the direction of GM i.e., GM and Oppenheimer Gold go up and down completely randomly.

Pair Corralation between GM and Oppenheimer Gold

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Oppenheimer Gold. In addition to that, GM is 1.53 times more volatile than Oppenheimer Gold Spec. It trades about -0.02 of its total potential returns per unit of risk. Oppenheimer Gold Spec is currently generating about 0.22 per unit of volatility. If you would invest  2,605  in Oppenheimer Gold Spec on December 22, 2024 and sell it today you would earn a total of  595.00  from holding Oppenheimer Gold Spec or generate 22.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Oppenheimer Gold Spec

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.

Oppenheimer Gold Spec

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oppenheimer Gold Spec are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Oppenheimer Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Oppenheimer Gold

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

The idea behind General Motors and Oppenheimer Gold Spec 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.