Correlation Between GM and Virtus Kar

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

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

Diversification Opportunities for GM and Virtus Kar

0.76

Correlation Coefficient

GM  Virtus Kar

Poor diversification

The 3 months correlation between GM and Virtus is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Virtus Kar Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Kar Capital 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 Virtus Kar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Kar Capital has no effect on the direction of GM i.e., GM and Virtus Kar go up and down completely randomly.

Pair Corralation between GM and Virtus Kar

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Virtus Kar. In addition to that, GM is 3.43 times more volatile than Virtus Kar Capital. It trades about -0.12 of its total potential returns per unit of risk. Virtus Kar Capital is currently generating about 0.23 per unit of volatility. If you would invest  2,306  in Virtus Kar Capital on September 17, 2024 and sell it today you would earn a total of  79.00  from holding Virtus Kar Capital or generate 3.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

General Motors  vs.  Virtus Kar Capital

General Motors

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Virtus Kar Capital

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Kar Capital are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Virtus Kar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and Virtus Kar

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

The idea behind General Motors and Virtus Kar Capital 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.