Correlation Between GM and Vanguard Information
Can any of the company-specific risk be diversified away by investing in both GM and Vanguard Information 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 Information 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 Information Technology, you can compare the effects of market volatilities on GM and Vanguard Information 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 Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Vanguard Information.
Diversification Opportunities for GM and Vanguard Information
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Vanguard is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Vanguard Information Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Information 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 Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Information has no effect on the direction of GM i.e., GM and Vanguard Information go up and down completely randomly.
Pair Corralation between GM and Vanguard Information
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.57 times more return on investment than Vanguard Information. However, GM is 1.57 times more volatile than Vanguard Information Technology. It trades about 0.08 of its potential returns per unit of risk. Vanguard Information Technology is currently generating about 0.1 per unit of risk. If you would invest 3,274 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,276 from holding General Motors or generate 69.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Vanguard Information Technolog
Performance |
| Timeline |
| General Motors |
| Vanguard Information |
GM and Vanguard Information Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Vanguard Information
The main advantage of trading using opposite GM and Vanguard Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Vanguard Information 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 Information will offset losses from the drop in Vanguard Information's long position.The idea behind General Motors and Vanguard Information Technology 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 Information vs. Vanguard Health Care | Vanguard Information vs. Vanguard Financials Index | Vanguard Information vs. Vanguard Sumer Discretionary | Vanguard Information vs. Vanguard Utilities Index |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Stocks Directory Find actively traded stocks across global markets | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals |