Correlation Between GM and Vanguard Momentum
Can any of the company-specific risk be diversified away by investing in both GM and Vanguard Momentum 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 Vanguard Momentum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Vanguard Momentum Factor, you can compare the effects of market volatilities on GM and Vanguard Momentum 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 Vanguard Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Vanguard Momentum.
Diversification Opportunities for GM and Vanguard Momentum
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Vanguard is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Vanguard Momentum Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Momentum Factor 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 Vanguard Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Momentum Factor has no effect on the direction of GM i.e., GM and Vanguard Momentum go up and down completely randomly.
Pair Corralation between GM and Vanguard Momentum
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.64 times more return on investment than Vanguard Momentum. However, GM is 1.64 times more volatile than Vanguard Momentum Factor. It trades about 0.1 of its potential returns per unit of risk. Vanguard Momentum Factor is currently generating about 0.11 per unit of risk. If you would invest 3,749 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,810 from holding General Motors or generate 48.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Vanguard Momentum Factor
Performance |
| Timeline |
| General Motors |
| Vanguard Momentum Factor |
GM and Vanguard Momentum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Vanguard Momentum
The main advantage of trading using opposite GM and Vanguard Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Vanguard Momentum 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 Vanguard Momentum will offset losses from the drop in Vanguard Momentum's long position.The idea behind General Motors and Vanguard Momentum Factor 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.| Vanguard Momentum vs. Vanguard Quality Factor | Vanguard Momentum vs. Vanguard Multifactor | Vanguard Momentum vs. Vanguard Value Factor | Vanguard Momentum vs. Vanguard Minimum Volatility |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Stocks Directory Find actively traded stocks across global markets | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |