Correlation Between GM and Voya Index
Can any of the company-specific risk be diversified away by investing in both GM and Voya Index 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 Voya Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Voya Index Plus, you can compare the effects of market volatilities on GM and Voya Index 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 Voya Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Voya Index.
Diversification Opportunities for GM and Voya Index
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Voya is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Voya Index Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Index Plus 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 Voya Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Index Plus has no effect on the direction of GM i.e., GM and Voya Index go up and down completely randomly.
Pair Corralation between GM and Voya Index
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.14 times more return on investment than Voya Index. However, GM is 2.14 times more volatile than Voya Index Plus. It trades about 0.05 of its potential returns per unit of risk. Voya Index Plus is currently generating about 0.1 per unit of risk. If you would invest 4,718 in General Motors on September 15, 2024 and sell it today you would earn a total of 535.00 from holding General Motors or generate 11.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
General Motors vs. Voya Index Plus
Performance |
Timeline |
General Motors |
Voya Index Plus |
GM and Voya Index Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Voya Index
The main advantage of trading using opposite GM and Voya Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Voya Index 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 Voya Index will offset losses from the drop in Voya Index's long position.The idea behind General Motors and Voya Index Plus 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.Voya Index vs. Voya Bond Index | Voya Index vs. Voya Bond Index | Voya Index vs. Voya Limited Maturity | Voya Index vs. Voya Limited Maturity |
Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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