Correlation Between GM and Very Good
Can any of the company-specific risk be diversified away by investing in both GM and Very Good 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 Very Good into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and The Very Good, you can compare the effects of market volatilities on GM and Very Good 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 Very Good. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Very Good.
Diversification Opportunities for GM and Very Good
Weak diversification
The 3 months correlation between GM and Very is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and The Very Good in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Very Good 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 Very Good. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Very Good has no effect on the direction of GM i.e., GM and Very Good go up and down completely randomly.
Pair Corralation between GM and Very Good
If you would invest 5,273 in General Motors on August 28, 2024 and sell it today you would earn a total of 747.00 from holding General Motors or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
General Motors vs. The Very Good
Performance |
| Timeline |
| General Motors |
| Very Good |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Very Good Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Very Good
The main advantage of trading using opposite GM and Very Good positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Very Good 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 Very Good will offset losses from the drop in Very Good's long position.The idea behind General Motors and The Very Good 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.| Very Good vs. Zhihu Inc ADR | Very Good vs. Old Republic International | Very Good vs. National CineMedia | Very Good vs. Sun Life Financial |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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