Correlation Between GM and Victory Capital

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

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

Diversification Opportunities for GM and Victory Capital

0.22

Correlation Coefficient

GM  Victory Capital

Modest diversification

The 3 months correlation between GM and Victory is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Victory Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Capital Holdings 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 Victory Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Capital Holdings has no effect on the direction of GM i.e., GM and Victory Capital go up and down completely randomly.

Pair Corralation between GM and Victory Capital

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Victory Capital. In addition to that, GM is 1.03 times more volatile than Victory Capital Holdings. It trades about -0.07 of its total potential returns per unit of risk. Victory Capital Holdings is currently generating about -0.04 per unit of volatility. If you would invest  6,869  in Victory Capital Holdings on December 1, 2024 and sell it today you would lose (465.00) from holding Victory Capital Holdings or give up 6.77% of portfolio value over 90 days.

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

General Motors  vs.  Victory Capital Holdings

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Victory Capital Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Victory Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Victory Capital is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GM and Victory Capital

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

The idea behind General Motors and Victory Capital Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.