Correlation Between GM and VETIVA S

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

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

Diversification Opportunities for GM and VETIVA S

-0.09

Correlation Coefficient

GM  VETIVA S

Good diversification

The 3 months correlation between GM and VETIVA is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and VETIVA S P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VETIVA S P 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 VETIVA S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VETIVA S P has no effect on the direction of GM i.e., GM and VETIVA S go up and down completely randomly.

Pair Corralation between GM and VETIVA S

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the VETIVA S. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 14.24 times less risky than VETIVA S. The stock trades about -0.08 of its potential returns per unit of risk. The VETIVA S P is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  19,203  in VETIVA S P on October 22, 2024 and sell it today you would earn a total of  5,006  from holding VETIVA S P or generate 26.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

General Motors  vs.  VETIVA S P

General Motors

Risk-Adjusted Performance

0 of 100

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 very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

VETIVA S P

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VETIVA S P are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, VETIVA S exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and VETIVA S

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

The idea behind General Motors and VETIVA S P 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 Commodity Directory module to find actively traded commodities issued by global exchanges.