Correlation Between GM and Vanguard Global
Can any of the company-specific risk be diversified away by investing in both GM and Vanguard Global 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 Global 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 Global Momentum, you can compare the effects of market volatilities on GM and Vanguard Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Vanguard Global.
Diversification Opportunities for GM and Vanguard Global
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Vanguard is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Vanguard Global Momentum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Momentum 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global Momentum has no effect on the direction of GM i.e., GM and Vanguard Global go up and down completely randomly.
Pair Corralation between GM and Vanguard Global
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.34 times more return on investment than Vanguard Global. However, GM is 2.34 times more volatile than Vanguard Global Momentum. It trades about 0.05 of its potential returns per unit of risk. Vanguard Global Momentum is currently generating about 0.1 per unit of risk. If you would invest 3,805 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,754 from holding General Motors or generate 46.1% 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 Global Momentum
Performance |
| Timeline |
| General Motors |
| Vanguard Global Momentum |
GM and Vanguard Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Vanguard Global
The main advantage of trading using opposite GM and Vanguard Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Vanguard Global 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 Global will offset losses from the drop in Vanguard Global's long position.The idea behind General Motors and Vanguard Global Momentum 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 Global vs. Vanguard Global Value | Vanguard Global vs. Vanguard Global Minimum | Vanguard Global vs. Vanguard FTSE Developed | Vanguard Global vs. Vanguard Dividend Appreciation |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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