Correlation Between GM and Bald Eagle

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

Diversification Opportunities for GM and Bald Eagle

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between GM and BADEF is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Bald Eagle Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bald Eagle Gold 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 Bald Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bald Eagle Gold has no effect on the direction of GM i.e., GM and Bald Eagle go up and down completely randomly.

Pair Corralation between GM and Bald Eagle

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Bald Eagle. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 2.74 times less risky than Bald Eagle. The stock trades about -0.03 of its potential returns per unit of risk. The Bald Eagle Gold is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Bald Eagle Gold on September 9, 2022 and sell it today you would earn a total of  1.76  from holding Bald Eagle Gold or generate 29.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Bald Eagle Gold

 Performance (%) 
       Timeline  
General Motors 
GM Performance
0 of 100
Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady primary indicators, GM is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

GM Price Channel

Bald Eagle Gold 
BADEF Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bald Eagle Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bald Eagle exhibited solid returns over the last few months and may actually be approaching a breakup point.

BADEF Price Channel

GM and Bald Eagle Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Bald Eagle

The main advantage of trading using opposite GM and Bald Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Bald Eagle 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 Bald Eagle will offset losses from the drop in Bald Eagle's long position.
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The idea behind General Motors and Bald Eagle Gold 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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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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