Correlation Between GM and Vow ASA
Can any of the company-specific risk be diversified away by investing in both GM and Vow ASA 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 Vow ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Vow ASA, you can compare the effects of market volatilities on GM and Vow ASA 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 Vow ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Vow ASA.
Diversification Opportunities for GM and Vow ASA
Very good diversification
The 3 months correlation between GM and Vow is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Vow ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vow ASA 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 Vow ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vow ASA has no effect on the direction of GM i.e., GM and Vow ASA go up and down completely randomly.
Pair Corralation between GM and Vow ASA
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.35 times more return on investment than Vow ASA. However, General Motors is 2.85 times less risky than Vow ASA. It trades about 0.14 of its potential returns per unit of risk. Vow ASA is currently generating about -0.08 per unit of risk. If you would invest 3,135 in General Motors on August 26, 2024 and sell it today you would earn a total of 2,718 from holding General Motors or generate 86.7% 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. Vow ASA
Performance |
| Timeline |
| General Motors |
| Vow ASA |
GM and Vow ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Vow ASA
The main advantage of trading using opposite GM and Vow ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Vow ASA 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 Vow ASA will offset losses from the drop in Vow ASA's long position.The idea behind General Motors and Vow ASA 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.| Vow ASA vs. TOMI Environmental Solutions | Vow ASA vs. Zurn Elkay Water | Vow ASA vs. Federal Signal | Vow ASA vs. Energy Recovery |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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