Correlation Between GM and Vanguard Primecap
Can any of the company-specific risk be diversified away by investing in both GM and Vanguard Primecap 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 Primecap 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 Primecap Fund, you can compare the effects of market volatilities on GM and Vanguard Primecap 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 Primecap. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Vanguard Primecap.
Diversification Opportunities for GM and Vanguard Primecap
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Vanguard is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Vanguard Primecap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Primecap 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 Primecap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Primecap has no effect on the direction of GM i.e., GM and Vanguard Primecap go up and down completely randomly.
Pair Corralation between GM and Vanguard Primecap
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.18 times more return on investment than Vanguard Primecap. However, GM is 2.18 times more volatile than Vanguard Primecap Fund. It trades about 0.32 of its potential returns per unit of risk. Vanguard Primecap Fund is currently generating about 0.02 per unit of risk. 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 | 100.0% |
| Values | Daily Returns |
General Motors vs. Vanguard Primecap Fund
Performance |
| Timeline |
| General Motors |
| Vanguard Primecap |
GM and Vanguard Primecap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Vanguard Primecap
The main advantage of trading using opposite GM and Vanguard Primecap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Vanguard Primecap 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 Primecap will offset losses from the drop in Vanguard Primecap's long position.The idea behind General Motors and Vanguard Primecap Fund 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 Primecap vs. Vanguard Windsor Ii | Vanguard Primecap vs. Vanguard Capital Opportunity | Vanguard Primecap vs. Vanguard International Growth | Vanguard Primecap vs. Vanguard Explorer Fund |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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