Correlation Between GM and SCI Pharmtech
Can any of the company-specific risk be diversified away by investing in both GM and SCI Pharmtech 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 SCI Pharmtech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and SCI Pharmtech, you can compare the effects of market volatilities on GM and SCI Pharmtech 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 SCI Pharmtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and SCI Pharmtech.
Diversification Opportunities for GM and SCI Pharmtech
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and SCI is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SCI Pharmtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCI Pharmtech 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 SCI Pharmtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCI Pharmtech has no effect on the direction of GM i.e., GM and SCI Pharmtech go up and down completely randomly.
Pair Corralation between GM and SCI Pharmtech
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.87 times more return on investment than SCI Pharmtech. However, GM is 1.87 times more volatile than SCI Pharmtech. It trades about -0.08 of its potential returns per unit of risk. SCI Pharmtech is currently generating about -0.31 per unit of risk. If you would invest 5,256 in General Motors on October 22, 2024 and sell it today you would lose (159.00) from holding General Motors or give up 3.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.48% |
| Values | Daily Returns |
General Motors vs. SCI Pharmtech
Performance |
| Timeline |
| General Motors |
| SCI Pharmtech |
GM and SCI Pharmtech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and SCI Pharmtech
The main advantage of trading using opposite GM and SCI Pharmtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, SCI Pharmtech 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 SCI Pharmtech will offset losses from the drop in SCI Pharmtech's long position.The idea behind General Motors and SCI Pharmtech 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.| SCI Pharmtech vs. Grape King Bio | SCI Pharmtech vs. Standard Chemical Pharmaceutical | SCI Pharmtech vs. Adimmune Corp | SCI Pharmtech vs. ScinoPharm Taiwan |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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