Correlation Between VIRG NATL and General Mills

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

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

Diversification Opportunities for VIRG NATL and General Mills

-0.48

Correlation Coefficient

VIRG NATL  General Mills

Very good diversification

The 3 months correlation between VIRG and General is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding VIRG NATL BANKSH and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills and VIRG NATL 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 VIRG NATL BANKSH are associated (or correlated) with General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of VIRG NATL i.e., VIRG NATL and General Mills go up and down completely randomly.

Pair Corralation between VIRG NATL and General Mills

Assuming the 90 days horizon VIRG NATL BANKSH is expected to under-perform the General Mills. In addition to that, VIRG NATL is 1.42 times more volatile than General Mills. It trades about -0.05 of its total potential returns per unit of risk. General Mills is currently generating about 0.12 per unit of volatility. If you would invest  8,921  in General Mills on December 29, 2024 and sell it today you would earn a total of  1,201  from holding General Mills or generate 13.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

VIRG NATL BANKSH  vs.  General Mills

VIRG NATL BANKSH

Risk-Adjusted Performance

Very Weak

Over the last 90 days VIRG NATL BANKSH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

General Mills

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Mills are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, General Mills reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VIRG NATL and General Mills

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

The idea behind VIRG NATL BANKSH and General Mills 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.