Correlation Between GM and Vidhi Specialty

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

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

Diversification Opportunities for GM and Vidhi Specialty

0.66

Correlation Coefficient

GM  Vidhi Specialty

Poor diversification

The 3 months correlation between GM and Vidhi is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Vidhi Specialty Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vidhi Specialty Food 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 Vidhi Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vidhi Specialty Food has no effect on the direction of GM i.e., GM and Vidhi Specialty go up and down completely randomly.

Pair Corralation between GM and Vidhi Specialty

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Vidhi Specialty. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.29 times less risky than Vidhi Specialty. The stock trades about -0.06 of its potential returns per unit of risk. The Vidhi Specialty Food is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  52,004  in Vidhi Specialty Food on December 29, 2024 and sell it today you would lose (6,554) from holding Vidhi Specialty Food or give up 12.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

General Motors  vs.  Vidhi Specialty Food

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 abnormal 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.

Vidhi Specialty Food

Risk-Adjusted Performance

Very Weak

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

Pair Trading with GM and Vidhi Specialty

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

The idea behind General Motors and Vidhi Specialty Food 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.