Correlation Between General Motors and Viridian Therapeutics

Can any of the company-specific risk be diversified away by investing in both General Motors and Viridian Therapeutics 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 General Motors and Viridian Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors Co and Viridian Therapeutics, you can compare the effects of market volatilities on General Motors and Viridian Therapeutics 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 General Motors with a short position of Viridian Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Motors and Viridian Therapeutics.

Diversification Opportunities for General Motors and Viridian Therapeutics

-0.29

Correlation Coefficient

General Motors  Viridian Therapeutics

Very good diversification

The 3 months correlation between General and Viridian is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding General Motors Co and Viridian Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viridian Therapeutics and General Motors 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 Co are associated (or correlated) with Viridian Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viridian Therapeutics has no effect on the direction of General Motors i.e., General Motors and Viridian Therapeutics go up and down completely randomly.

Pair Corralation between General Motors and Viridian Therapeutics

Assuming the 90 days trading horizon General Motors Co is expected to generate 0.45 times more return on investment than Viridian Therapeutics. However, General Motors Co is 2.23 times less risky than Viridian Therapeutics. It trades about 0.1 of its potential returns per unit of risk. Viridian Therapeutics is currently generating about 0.03 per unit of risk. If you would invest  3,286  in General Motors Co on September 27, 2024 and sell it today you would earn a total of  1,984  from holding General Motors Co or generate 60.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.44%
Values	Daily Returns

General Motors Co  vs.  Viridian Therapeutics

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, General Motors unveiled solid returns over the last few months and may actually be approaching a breakup point.

Viridian Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viridian Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with General Motors and Viridian Therapeutics

The main advantage of trading using opposite General Motors and Viridian Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Motors position performs unexpectedly, Viridian Therapeutics 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 Viridian Therapeutics will offset losses from the drop in Viridian Therapeutics' long position.

The idea behind General Motors Co and Viridian Therapeutics 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.