Correlation Between GM and VanEck Low

Can any of the company-specific risk be diversified away by investing in both GM and VanEck Low 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 Low 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 Low Carbon, you can compare the effects of market volatilities on GM and VanEck Low 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 Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and VanEck Low.

Diversification Opportunities for GM and VanEck Low

-0.79

Correlation Coefficient

GM  VanEck Low

Pay attention - limited upside

The 3 months correlation between GM and VanEck is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and VanEck Low Carbon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Low Carbon 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 Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Low Carbon has no effect on the direction of GM i.e., GM and VanEck Low go up and down completely randomly.

Pair Corralation between GM and VanEck Low

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.5 times more return on investment than VanEck Low. However, GM is 1.5 times more volatile than VanEck Low Carbon. It trades about 0.05 of its potential returns per unit of risk. VanEck Low Carbon is currently generating about -0.01 per unit of risk. If you would invest  3,585  in General Motors on October 7, 2024 and sell it today you would earn a total of  1,592  from holding General Motors or generate 44.41% return on investment over 90 days.

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

General Motors  vs.  VanEck Low Carbon

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 Low Carbon

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with GM and VanEck Low

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

The idea behind General Motors and VanEck Low Carbon 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.