Correlation Between GM and VanEck Oil
Can any of the company-specific risk be diversified away by investing in both GM and VanEck 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 VanEck 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 VanEck Oil Services, you can compare the effects of market volatilities on GM and VanEck 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 VanEck Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and VanEck Oil.
Diversification Opportunities for GM and VanEck Oil
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and VanEck is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and VanEck Oil Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Oil Services 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 VanEck Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Oil Services has no effect on the direction of GM i.e., GM and VanEck Oil go up and down completely randomly.
Pair Corralation between GM and VanEck Oil
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.42 times more return on investment than VanEck Oil. However, GM is 1.42 times more volatile than VanEck Oil Services. It trades about 0.06 of its potential returns per unit of risk. VanEck Oil Services is currently generating about 0.02 per unit of risk. If you would invest 3,263 in General Motors on September 14, 2024 and sell it today you would earn a total of 1,997 from holding General Motors or generate 61.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 76.36% |
| Values | Daily Returns |
General Motors vs. VanEck Oil Services
Performance |
| Timeline |
| General Motors |
| VanEck Oil Services |
GM and VanEck Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and VanEck Oil
The main advantage of trading using opposite GM and VanEck Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, VanEck 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 VanEck Oil will offset losses from the drop in VanEck Oil's long position.The idea behind General Motors and VanEck Oil Services 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.| VanEck Oil vs. UBSFund Solutions MSCI | VanEck Oil vs. Vanguard SP 500 | VanEck Oil vs. iShares VII PLC | VanEck Oil vs. iShares Core SP |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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