Correlation Between GM and Vest Large

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

By analyzing existing cross correlation between General Motors and Vest Large Cap, you can compare the effects of market volatilities on GM and Vest Large 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 Vest Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Vest Large.

Diversification Opportunities for GM and Vest Large

0.01

Correlation Coefficient

GM  Vest Large

Significant diversification

The 3 months correlation between GM and Vest is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Vest Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vest Large Cap 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 Vest Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vest Large Cap has no effect on the direction of GM i.e., GM and Vest Large go up and down completely randomly.

Pair Corralation between GM and Vest Large

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Vest Large. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.11 times less risky than Vest Large. The stock trades about -0.07 of its potential returns per unit of risk. The Vest Large Cap is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  766.00  in Vest Large Cap on September 27, 2024 and sell it today you would earn a total of  39.00  from holding Vest Large Cap or generate 5.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Vest Large Cap

General Motors

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Vest Large Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vest Large Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vest Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Vest Large

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

The idea behind General Motors and Vest Large Cap 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.