Correlation Between GM and Verisk Analytics
Can any of the company-specific risk be diversified away by investing in both GM and Verisk Analytics 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 Verisk Analytics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Verisk Analytics, you can compare the effects of market volatilities on GM and Verisk Analytics 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 Verisk Analytics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Verisk Analytics.
Diversification Opportunities for GM and Verisk Analytics
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Verisk is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Verisk Analytics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verisk Analytics 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 Verisk Analytics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verisk Analytics has no effect on the direction of GM i.e., GM and Verisk Analytics go up and down completely randomly.
Pair Corralation between GM and Verisk Analytics
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.7 times more return on investment than Verisk Analytics. However, GM is 1.7 times more volatile than Verisk Analytics. It trades about 0.06 of its potential returns per unit of risk. Verisk Analytics is currently generating about 0.09 per unit of risk. If you would invest 3,525 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,034 from holding General Motors or generate 57.7% 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. Verisk Analytics
Performance |
| Timeline |
| General Motors |
| Verisk Analytics |
GM and Verisk Analytics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Verisk Analytics
The main advantage of trading using opposite GM and Verisk Analytics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Verisk Analytics 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 Verisk Analytics will offset losses from the drop in Verisk Analytics' long position.The idea behind General Motors and Verisk Analytics 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.| Verisk Analytics vs. CRA International | Verisk Analytics vs. Huron Consulting Group | Verisk Analytics vs. Forrester Research | Verisk Analytics vs. Exponent |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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