Correlation Between GM and Voya Prime
Can any of the company-specific risk be diversified away by investing in both GM and Voya Prime 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 Voya Prime into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Voya Prime Rate, you can compare the effects of market volatilities on GM and Voya Prime 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 Voya Prime. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Voya Prime.
Diversification Opportunities for GM and Voya Prime
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Voya is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Voya Prime Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Prime Rate 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 Voya Prime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Prime Rate has no effect on the direction of GM i.e., GM and Voya Prime go up and down completely randomly.
Pair Corralation between GM and Voya Prime
Allowing for the 90-day total investment horizon General Motors is expected to generate 6.56 times more return on investment than Voya Prime. However, GM is 6.56 times more volatile than Voya Prime Rate. It trades about 0.17 of its potential returns per unit of risk. Voya Prime Rate is currently generating about 0.69 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% 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. Voya Prime Rate
Performance |
| Timeline |
| General Motors |
| Voya Prime Rate |
GM and Voya Prime Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Voya Prime
The main advantage of trading using opposite GM and Voya Prime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Voya Prime 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 Voya Prime will offset losses from the drop in Voya Prime's long position.The idea behind General Motors and Voya Prime Rate 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.| Voya Prime vs. Vanguard Total Stock | Voya Prime vs. Vanguard 500 Index | Voya Prime vs. Vanguard Total Stock | Voya Prime vs. Vanguard Total Stock |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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