Correlation Between GM and Vaxil Bio

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

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

Diversification Opportunities for GM and Vaxil Bio

0.0

Correlation Coefficient

GM  Vaxil Bio

Pay attention - limited upside

The 3 months correlation between GM and Vaxil is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Vaxil Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaxil Bio 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 Vaxil Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaxil Bio has no effect on the direction of GM i.e., GM and Vaxil Bio go up and down completely randomly.

Pair Corralation between GM and Vaxil Bio

Allowing for the 90-day total investment horizon GM is expected to generate 7.88 times less return on investment than Vaxil Bio. But when comparing it to its historical volatility, General Motors is 6.77 times less risky than Vaxil Bio. It trades about 0.05 of its potential returns per unit of risk. Vaxil Bio is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Vaxil Bio on September 19, 2024 and sell it today you would lose (0.50) from holding Vaxil Bio or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

General Motors  vs.  Vaxil Bio

General Motors

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Vaxil Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vaxil Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vaxil Bio is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GM and Vaxil Bio

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

The idea behind General Motors and Vaxil Bio 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.