Correlation Between GM and BARRICK

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

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

Diversification Opportunities for GM and BARRICK

-0.16

Correlation Coefficient

GM  BARRICK

Good diversification

The 3 months correlation between GM and BARRICK is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and BARRICK NORTH AMER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BARRICK NORTH AMER 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 BARRICK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BARRICK NORTH AMER has no effect on the direction of GM i.e., GM and BARRICK go up and down completely randomly.

Pair Corralation between GM and BARRICK

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the BARRICK. In addition to that, GM is 1.33 times more volatile than BARRICK NORTH AMER. It trades about -0.08 of its total potential returns per unit of risk. BARRICK NORTH AMER is currently generating about 0.17 per unit of volatility. If you would invest  9,921  in BARRICK NORTH AMER on October 22, 2024 and sell it today you would earn a total of  325.00  from holding BARRICK NORTH AMER or generate 3.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.95%
Values	Daily Returns

General Motors  vs.  BARRICK NORTH AMER

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.

BARRICK NORTH AMER

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BARRICK NORTH AMER has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BARRICK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and BARRICK

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

The idea behind General Motors and BARRICK NORTH AMER 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.