Correlation Between GM and BioLine RX
Can any of the company-specific risk be diversified away by investing in both GM and BioLine RX 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 BioLine RX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and BioLine RX, you can compare the effects of market volatilities on GM and BioLine RX 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 BioLine RX. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and BioLine RX.
Diversification Opportunities for GM and BioLine RX
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and BioLine is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and BioLine RX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLine RX 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 BioLine RX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioLine RX has no effect on the direction of GM i.e., GM and BioLine RX go up and down completely randomly.
Pair Corralation between GM and BioLine RX
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.42 times more return on investment than BioLine RX. However, General Motors is 2.36 times less risky than BioLine RX. It trades about 0.08 of its potential returns per unit of risk. BioLine RX is currently generating about -0.13 per unit of risk. If you would invest 4,551 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,008 from holding General Motors or generate 22.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 76.19% |
| Values | Daily Returns |
General Motors vs. BioLine RX
Performance |
| Timeline |
| General Motors |
| BioLine RX |
GM and BioLine RX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and BioLine RX
The main advantage of trading using opposite GM and BioLine RX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, BioLine RX 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 BioLine RX will offset losses from the drop in BioLine RX's long position.The idea behind General Motors and BioLine RX 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.| BioLine RX vs. Bezeq Israeli Telecommunication | BioLine RX vs. Brainsway | BioLine RX vs. Mivne Real Estate | BioLine RX vs. Photomyne |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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