Correlation Between GM and Versatile Creative

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

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

Diversification Opportunities for GM and Versatile Creative

0.47

Correlation Coefficient

GM  Versatile Creative

Very weak diversification

The 3 months correlation between GM and Versatile is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Versatile Creative Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Versatile Creative Bhd 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 Versatile Creative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Versatile Creative Bhd has no effect on the direction of GM i.e., GM and Versatile Creative go up and down completely randomly.

Pair Corralation between GM and Versatile Creative

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.99 times more return on investment than Versatile Creative. However, General Motors is 1.01 times less risky than Versatile Creative. It trades about 0.1 of its potential returns per unit of risk. Versatile Creative Bhd is currently generating about 0.04 per unit of risk. If you would invest  3,273  in General Motors on September 27, 2024 and sell it today you would earn a total of  2,078  from holding General Motors or generate 63.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.77%
Values	Daily Returns

General Motors  vs.  Versatile Creative Bhd

General Motors

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 8 (%) 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.

Versatile Creative Bhd

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Versatile Creative Bhd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Versatile Creative may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and Versatile Creative

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

The idea behind General Motors and Versatile Creative Bhd 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.