Correlation Between GM and Phreesia
Can any of the company-specific risk be diversified away by investing in both GM and Phreesia 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 Phreesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Phreesia, you can compare the effects of market volatilities on GM and Phreesia 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 Phreesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Phreesia.
Diversification Opportunities for GM and Phreesia
Good diversification
The 3 months correlation between GM and Phreesia is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Phreesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phreesia 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 Phreesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phreesia has no effect on the direction of GM i.e., GM and Phreesia go up and down completely randomly.
Pair Corralation between GM and Phreesia
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.62 times more return on investment than Phreesia. However, General Motors is 1.61 times less risky than Phreesia. It trades about 0.06 of its potential returns per unit of risk. Phreesia is currently generating about 0.03 per unit of risk. If you would invest 4,616 in General Motors on September 21, 2024 and sell it today you would earn a total of 552.50 from holding General Motors or generate 11.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.17% |
| Values | Daily Returns |
General Motors vs. Phreesia
Performance |
| Timeline |
| General Motors |
| Phreesia |
GM and Phreesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Phreesia
The main advantage of trading using opposite GM and Phreesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Phreesia 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 Phreesia will offset losses from the drop in Phreesia's long position.The idea behind General Motors and Phreesia 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.| Phreesia vs. ELMOS SEMICONDUCTOR | Phreesia vs. ARROW ELECTRONICS | Phreesia vs. TT Electronics PLC | Phreesia vs. KIMBALL ELECTRONICS |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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