Correlation Between GM and Daihan Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both GM and Daihan Pharmaceutical 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 Daihan Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Daihan Pharmaceutical CoLtd, you can compare the effects of market volatilities on GM and Daihan Pharmaceutical 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 Daihan Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Daihan Pharmaceutical.
Diversification Opportunities for GM and Daihan Pharmaceutical
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Daihan is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Daihan Pharmaceutical CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daihan Pharmaceutical 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 Daihan Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daihan Pharmaceutical has no effect on the direction of GM i.e., GM and Daihan Pharmaceutical go up and down completely randomly.
Pair Corralation between GM and Daihan Pharmaceutical
Allowing for the 90-day total investment horizon GM is expected to generate 1.07 times less return on investment than Daihan Pharmaceutical. In addition to that, GM is 2.08 times more volatile than Daihan Pharmaceutical CoLtd. It trades about 0.07 of its total potential returns per unit of risk. Daihan Pharmaceutical CoLtd is currently generating about 0.17 per unit of volatility. If you would invest 2,520,000 in Daihan Pharmaceutical CoLtd on August 29, 2024 and sell it today you would earn a total of 125,000 from holding Daihan Pharmaceutical CoLtd or generate 4.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Daihan Pharmaceutical CoLtd
Performance |
| Timeline |
| General Motors |
| Daihan Pharmaceutical |
GM and Daihan Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Daihan Pharmaceutical
The main advantage of trading using opposite GM and Daihan Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Daihan Pharmaceutical 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 Daihan Pharmaceutical will offset losses from the drop in Daihan Pharmaceutical's long position.The idea behind General Motors and Daihan Pharmaceutical CoLtd 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.| Daihan Pharmaceutical vs. Kolon Life Science | Daihan Pharmaceutical vs. Aminologics CoLtd | Daihan Pharmaceutical vs. Withuspharmaceutical CoLtd | Daihan Pharmaceutical vs. High Tech Pharm |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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