Correlation Between GM and Argenx NV
Can any of the company-specific risk be diversified away by investing in both GM and Argenx NV 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 Argenx NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and argenx NV ADR, you can compare the effects of market volatilities on GM and Argenx NV 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 Argenx NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Argenx NV.
Diversification Opportunities for GM and Argenx NV
Poor diversification
The 3 months correlation between GM and Argenx is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and argenx NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on argenx NV ADR 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 Argenx NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of argenx NV ADR has no effect on the direction of GM i.e., GM and Argenx NV go up and down completely randomly.
Pair Corralation between GM and Argenx NV
Allowing for the 90-day total investment horizon GM is expected to generate 1.34 times less return on investment than Argenx NV. But when comparing it to its historical volatility, General Motors is 1.27 times less risky than Argenx NV. It trades about 0.14 of its potential returns per unit of risk. argenx NV ADR is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 55,792 in argenx NV ADR on August 24, 2024 and sell it today you would earn a total of 3,882 from holding argenx NV ADR or generate 6.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. argenx NV ADR
Performance |
| Timeline |
| General Motors |
| argenx NV ADR |
GM and Argenx NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Argenx NV
The main advantage of trading using opposite GM and Argenx NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Argenx NV 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 Argenx NV will offset losses from the drop in Argenx NV's long position.The idea behind General Motors and argenx NV ADR 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.| Argenx NV vs. Blueprint Medicines Corp | Argenx NV vs. Amylyx Pharmaceuticals | Argenx NV vs. Day One Biopharmaceuticals | Argenx NV vs. Terns Pharmaceuticals |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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