Correlation Between GM and Tocqueville International

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

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

Diversification Opportunities for GM and Tocqueville International

0.14

Correlation Coefficient

GM  Tocqueville International

Average diversification

The 3 months correlation between GM and Tocqueville is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and The Tocqueville International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tocqueville International 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 Tocqueville International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tocqueville International has no effect on the direction of GM i.e., GM and Tocqueville International go up and down completely randomly.

Pair Corralation between GM and Tocqueville International

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.8 times more return on investment than Tocqueville International. However, GM is 1.8 times more volatile than The Tocqueville International. It trades about 0.03 of its potential returns per unit of risk. The Tocqueville International is currently generating about -0.17 per unit of risk. If you would invest  5,280  in General Motors on October 23, 2024 and sell it today you would earn a total of  107.50  from holding General Motors or generate 2.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

General Motors  vs.  The Tocqueville International

General Motors

Risk-Adjusted Performance

2 of 100

Very 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 current stock price disarray, may contribute to short-term losses for the investors.

Tocqueville International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Tocqueville International has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with GM and Tocqueville International

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

The idea behind General Motors and The Tocqueville International 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.