Correlation Between GM and Verallia Société
Can any of the company-specific risk be diversified away by investing in both GM and Verallia Société 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 Verallia Société into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Verallia Socit Anonyme, you can compare the effects of market volatilities on GM and Verallia Société 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 Verallia Société. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Verallia Société.
Diversification Opportunities for GM and Verallia Société
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Verallia is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Verallia Socit Anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verallia Socit Anonyme 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 Verallia Société. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verallia Socit Anonyme has no effect on the direction of GM i.e., GM and Verallia Société go up and down completely randomly.
Pair Corralation between GM and Verallia Société
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.0 times more return on investment than Verallia Société. However, General Motors is 1.0 times less risky than Verallia Société. It trades about 0.08 of its potential returns per unit of risk. Verallia Socit Anonyme is currently generating about -0.03 per unit of risk. If you would invest 3,274 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,276 from holding General Motors or generate 69.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.77% |
| Values | Daily Returns |
General Motors vs. Verallia Socit Anonyme
Performance |
| Timeline |
| General Motors |
| Verallia Socit Anonyme |
GM and Verallia Société Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Verallia Société
The main advantage of trading using opposite GM and Verallia Société positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Verallia Société 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 Verallia Société will offset losses from the drop in Verallia Société's long position.The idea behind General Motors and Verallia Socit Anonyme 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.| Verallia Société vs. MACOM Technology Solutions | Verallia Société vs. ITALIAN WINE BRANDS | Verallia Société vs. Tri Pointe Homes | Verallia Société vs. SMA Solar Technology |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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