Correlation Between GM and Evolent Health
Can any of the company-specific risk be diversified away by investing in both GM and Evolent Health 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 Evolent Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Evolent Health, you can compare the effects of market volatilities on GM and Evolent Health 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 Evolent Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Evolent Health.
Diversification Opportunities for GM and Evolent Health
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Evolent is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Evolent Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolent Health 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 Evolent Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolent Health has no effect on the direction of GM i.e., GM and Evolent Health go up and down completely randomly.
Pair Corralation between GM and Evolent Health
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.41 times more return on investment than Evolent Health. However, General Motors is 2.46 times less risky than Evolent Health. It trades about 0.12 of its potential returns per unit of risk. Evolent Health is currently generating about -0.07 per unit of risk. If you would invest 4,287 in General Motors on August 25, 2024 and sell it today you would earn a total of 1,566 from holding General Motors or generate 36.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 97.69% |
| Values | Daily Returns |
General Motors vs. Evolent Health
Performance |
| Timeline |
| General Motors |
| Evolent Health |
GM and Evolent Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Evolent Health
The main advantage of trading using opposite GM and Evolent Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Evolent Health 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 Evolent Health will offset losses from the drop in Evolent Health's long position.The idea behind General Motors and Evolent Health 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.| Evolent Health vs. Superior Plus Corp | Evolent Health vs. NMI Holdings | Evolent Health vs. Origin Agritech | Evolent Health vs. SIVERS SEMICONDUCTORS AB |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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