Correlation Between GM and Vaneck Environmental

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

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

Diversification Opportunities for GM and Vaneck Environmental

0.0

Correlation Coefficient

GM  Vaneck Environmental

Pay attention - limited upside

The 3 months correlation between GM and Vaneck is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Vaneck Environmental Sustainab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaneck Environmental 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 Vaneck Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaneck Environmental has no effect on the direction of GM i.e., GM and Vaneck Environmental go up and down completely randomly.

Pair Corralation between GM and Vaneck Environmental

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.05 times more return on investment than Vaneck Environmental. However, GM is 2.05 times more volatile than Vaneck Environmental Sustainability. It trades about 0.05 of its potential returns per unit of risk. Vaneck Environmental Sustainability is currently generating about -0.03 per unit of risk. If you would invest  3,805  in General Motors on September 3, 2024 and sell it today you would earn a total of  1,754  from holding General Motors or generate 46.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Vaneck Environmental Sustainab

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

Vaneck Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vaneck Environmental Sustainability has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Vaneck Environmental 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 Vaneck Environmental

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

The idea behind General Motors and Vaneck Environmental Sustainability 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.