Correlation Between GM and Victory Energy

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

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

Diversification Opportunities for GM and Victory Energy

-0.69

Correlation Coefficient

GM  Victory Energy

Excellent diversification

The 3 months correlation between GM and Victory is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Victory Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Energy Corp 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 Victory Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Energy Corp has no effect on the direction of GM i.e., GM and Victory Energy go up and down completely randomly.

Pair Corralation between GM and Victory Energy

Allowing for the 90-day total investment horizon GM is expected to generate 280.68 times less return on investment than Victory Energy. But when comparing it to its historical volatility, General Motors is 85.24 times less risky than Victory Energy. It trades about 0.07 of its potential returns per unit of risk. Victory Energy Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  55.00  in Victory Energy Corp on August 29, 2024 and sell it today you would lose (25.00) from holding Victory Energy Corp or give up 45.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

General Motors  vs.  Victory Energy Corp

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Victory Energy Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Energy Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical and fundamental indicators, Victory Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Victory Energy

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

The idea behind General Motors and Victory Energy Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.