Correlation Between GM and Ascelia Pharma

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Can any of the company-specific risk be diversified away by investing in both GM and Ascelia Pharma 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 Ascelia Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Ascelia Pharma AB, you can compare the effects of market volatilities on GM and Ascelia Pharma 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 Ascelia Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Ascelia Pharma.

Diversification Opportunities for GM and Ascelia Pharma

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between GM and Ascelia is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ascelia Pharma AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascelia Pharma AB 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 Ascelia Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascelia Pharma AB has no effect on the direction of GM i.e., GM and Ascelia Pharma go up and down completely randomly.

Pair Corralation between GM and Ascelia Pharma

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Ascelia Pharma. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.44 times less risky than Ascelia Pharma. The stock trades about -0.15 of its potential returns per unit of risk. The Ascelia Pharma AB is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  265.00  in Ascelia Pharma AB on September 12, 2024 and sell it today you would earn a total of  51.00  from holding Ascelia Pharma AB or generate 19.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

General Motors  vs.  Ascelia Pharma AB

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.
Ascelia Pharma AB 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ascelia Pharma AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Ascelia Pharma unveiled solid returns over the last few months and may actually be approaching a breakup point.

GM and Ascelia Pharma Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Ascelia Pharma

The main advantage of trading using opposite GM and Ascelia Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Ascelia Pharma 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 Ascelia Pharma will offset losses from the drop in Ascelia Pharma's long position.
The idea behind General Motors and Ascelia Pharma AB 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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