Correlation Between GM and Virtus Multi-sector
Can any of the company-specific risk be diversified away by investing in both GM and Virtus Multi-sector 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 Multi-sector 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 Multi Sector Short, you can compare the effects of market volatilities on GM and Virtus Multi-sector 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 Multi-sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Virtus Multi-sector.
Diversification Opportunities for GM and Virtus Multi-sector
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Virtus is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Virtus Multi Sector Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Multi Sector 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 Multi-sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Multi Sector has no effect on the direction of GM i.e., GM and Virtus Multi-sector go up and down completely randomly.
Pair Corralation between GM and Virtus Multi-sector
Allowing for the 90-day total investment horizon General Motors is expected to generate 11.26 times more return on investment than Virtus Multi-sector. However, GM is 11.26 times more volatile than Virtus Multi Sector Short. It trades about 0.14 of its potential returns per unit of risk. Virtus Multi Sector Short is currently generating about 0.17 per unit of risk. If you would invest 3,126 in General Motors on August 25, 2024 and sell it today you would earn a total of 2,727 from holding General Motors or generate 87.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Virtus Multi Sector Short
Performance |
| Timeline |
| General Motors |
| Virtus Multi Sector |
GM and Virtus Multi-sector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Virtus Multi-sector
The main advantage of trading using opposite GM and Virtus Multi-sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Virtus Multi-sector 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 Multi-sector will offset losses from the drop in Virtus Multi-sector's long position.The idea behind General Motors and Virtus Multi Sector Short 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 Multi-sector vs. Virtus Multi Strategy Target | Virtus Multi-sector vs. Ridgeworth Seix High | Virtus Multi-sector vs. Ridgeworth Innovative Growth | Virtus Multi-sector vs. Ridgeworth Seix Porate |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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