Correlation Between GM and Ventana Biotech
Can any of the company-specific risk be diversified away by investing in both GM and Ventana Biotech 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 Ventana Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Ventana Biotech, you can compare the effects of market volatilities on GM and Ventana Biotech 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 Ventana Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Ventana Biotech.
Diversification Opportunities for GM and Ventana Biotech
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Ventana is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ventana Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ventana Biotech 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 Ventana Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ventana Biotech has no effect on the direction of GM i.e., GM and Ventana Biotech go up and down completely randomly.
Pair Corralation between GM and Ventana Biotech
Allowing for the 90-day total investment horizon GM is expected to generate 25.52 times less return on investment than Ventana Biotech. But when comparing it to its historical volatility, General Motors is 21.72 times less risky than Ventana Biotech. It trades about 0.05 of its potential returns per unit of risk. Ventana Biotech is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.28 in Ventana Biotech on August 26, 2024 and sell it today you would lose (0.24) from holding Ventana Biotech or give up 85.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Ventana Biotech
Performance |
| Timeline |
| General Motors |
| Ventana Biotech |
GM and Ventana Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Ventana Biotech
The main advantage of trading using opposite GM and Ventana Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Ventana Biotech 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 Ventana Biotech will offset losses from the drop in Ventana Biotech's long position.The idea behind General Motors and Ventana Biotech 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.| Ventana Biotech vs. Active Health Foods | Ventana Biotech vs. Profitable Develop | Ventana Biotech vs. KAT Exploration | Ventana Biotech vs. A1 Group |
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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