Correlation Between GM and NEWMONT

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

Diversification Opportunities for GM and NEWMONT

GMNEWMONTDiversified AwayGMNEWMONTDiversified Away100%
-0.55
  Correlation Coefficient

Excellent diversification

The 3 months correlation between GM and NEWMONT is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and NEWMONT MNG P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEWMONT MNG P 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 NEWMONT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEWMONT MNG P has no effect on the direction of GM i.e., GM and NEWMONT go up and down completely randomly.

Pair Corralation between GM and NEWMONT

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.89 times more return on investment than NEWMONT. However, GM is 1.89 times more volatile than NEWMONT MNG P. It trades about 0.03 of its potential returns per unit of risk. NEWMONT MNG P is currently generating about -0.05 per unit of risk. If you would invest  4,852  in General Motors on October 13, 2024 and sell it today you would earn a total of  133.00  from holding General Motors or generate 2.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy85.48%
ValuesDaily Returns

General Motors  vs.  NEWMONT MNG P

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 0102030
JavaScript chart by amCharts 3.21.15GM 651639AP1
       Timeline  
General Motors 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
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 latest stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan4850525456586062
NEWMONT MNG P 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NEWMONT MNG P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NEWMONT is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15302380233124899091929394959697

GM and NEWMONT Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.64-5.73-3.81-1.890.01.913.895.877.859.83 0.050.100.15
JavaScript chart by amCharts 3.21.15GM 651639AP1
       Returns  

Pair Trading with GM and NEWMONT

The main advantage of trading using opposite GM and NEWMONT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, NEWMONT 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 NEWMONT will offset losses from the drop in NEWMONT's long position.
The idea behind General Motors and NEWMONT MNG P 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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