Correlation Between GM and Viohalco

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

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

Diversification Opportunities for GM and Viohalco

0.1

Correlation Coefficient

GM  Viohalco

Average diversification

The 3 months correlation between GM and Viohalco is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Viohalco SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viohalco SA 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 Viohalco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viohalco SA has no effect on the direction of GM i.e., GM and Viohalco go up and down completely randomly.

Pair Corralation between GM and Viohalco

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Viohalco. In addition to that, GM is 1.47 times more volatile than Viohalco SA. It trades about -0.06 of its total potential returns per unit of risk. Viohalco SA is currently generating about 0.12 per unit of volatility. If you would invest  537.00  in Viohalco SA on December 28, 2024 and sell it today you would earn a total of  70.00  from holding Viohalco SA or generate 13.04% return on investment over 90 days.

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

General Motors  vs.  Viohalco SA

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.

Viohalco SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Viohalco SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Viohalco unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Viohalco

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

The idea behind General Motors and Viohalco SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.