Correlation Between GM and Zion Oil

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

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

Diversification Opportunities for GM and Zion Oil

-0.7

Correlation Coefficient

GM  Zion Oil

Excellent diversification

The 3 months correlation between GM and Zion is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Zion Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zion Oil Gas 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 Zion Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zion Oil Gas has no effect on the direction of GM i.e., GM and Zion Oil go up and down completely randomly.

Pair Corralation between GM and Zion Oil

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.28 times more return on investment than Zion Oil. However, General Motors is 3.58 times less risky than Zion Oil. It trades about 0.04 of its potential returns per unit of risk. Zion Oil Gas is currently generating about -0.01 per unit of risk. If you would invest  3,849  in General Motors on September 17, 2024 and sell it today you would earn a total of  1,292  from holding General Motors or generate 33.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	22.59%
Values	Daily Returns

General Motors  vs.  Zion Oil Gas

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Zion Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zion Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Zion Oil is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GM and Zion Oil

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

The idea behind General Motors and Zion Oil Gas 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.