Correlation Between GM and Virtus Newfleet
Can any of the company-specific risk be diversified away by investing in both GM and Virtus Newfleet 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 Virtus Newfleet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Virtus Newfleet Multi Sector, you can compare the effects of market volatilities on GM and Virtus Newfleet 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 Virtus Newfleet. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Virtus Newfleet.
Diversification Opportunities for GM and Virtus Newfleet
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Virtus is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Virtus Newfleet Multi Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Newfleet Multi 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 Virtus Newfleet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Newfleet Multi has no effect on the direction of GM i.e., GM and Virtus Newfleet go up and down completely randomly.
Pair Corralation between GM and Virtus Newfleet
Allowing for the 90-day total investment horizon General Motors is expected to generate 9.39 times more return on investment than Virtus Newfleet. However, GM is 9.39 times more volatile than Virtus Newfleet Multi Sector. It trades about 0.08 of its potential returns per unit of risk. Virtus Newfleet Multi Sector is currently generating about 0.16 per unit of risk. If you would invest 4,551 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,008 from holding General Motors or generate 22.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Virtus Newfleet Multi Sector
Performance |
| Timeline |
| General Motors |
| Virtus Newfleet Multi |
GM and Virtus Newfleet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Virtus Newfleet
The main advantage of trading using opposite GM and Virtus Newfleet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Virtus Newfleet 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 Virtus Newfleet will offset losses from the drop in Virtus Newfleet's long position.The idea behind General Motors and Virtus Newfleet Multi Sector 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.| Virtus Newfleet vs. NuShares Enhanced Yield | Virtus Newfleet vs. Invesco Fundamental Investment | Virtus Newfleet vs. Invesco Global Short |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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