Correlation Between GRS and VIA
Can any of the company-specific risk be diversified away by investing in both GRS and VIA 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 GRS and VIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GRS and VIA, you can compare the effects of market volatilities on GRS and VIA 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 GRS with a short position of VIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GRS and VIA.
Diversification Opportunities for GRS and VIA
Significant diversification
The 3 months correlation between GRS and VIA is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding GRS and VIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIA and GRS 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 GRS are associated (or correlated) with VIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIA has no effect on the direction of GRS i.e., GRS and VIA go up and down completely randomly.
Pair Corralation between GRS and VIA
Assuming the 90 days trading horizon GRS is expected to under-perform the VIA. In addition to that, GRS is 2.63 times more volatile than VIA. It trades about -0.21 of its total potential returns per unit of risk. VIA is currently generating about -0.17 per unit of volatility. If you would invest 1.46 in VIA on November 18, 2024 and sell it today you would lose (0.09) from holding VIA or give up 6.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GRS vs. VIA
Performance |
| Timeline |
| GRS |
| VIA |
GRS and VIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GRS and VIA
The main advantage of trading using opposite GRS and VIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GRS position performs unexpectedly, VIA 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 VIA will offset losses from the drop in VIA's long position.The idea behind GRS and VIA 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.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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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