Correlation Between GM and Biotech Medics
Can any of the company-specific risk be diversified away by investing in both GM and Biotech Medics 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 Biotech Medics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Biotech Medics Ne, you can compare the effects of market volatilities on GM and Biotech Medics 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 Biotech Medics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Biotech Medics.
Diversification Opportunities for GM and Biotech Medics
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Biotech is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Biotech Medics Ne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotech Medics Ne 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 Biotech Medics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotech Medics Ne has no effect on the direction of GM i.e., GM and Biotech Medics go up and down completely randomly.
Pair Corralation between GM and Biotech Medics
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Biotech Medics. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.46 times less risky than Biotech Medics. The stock trades about -0.05 of its potential returns per unit of risk. The Biotech Medics Ne is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1.65 in Biotech Medics Ne on November 3, 2024 and sell it today you would lose (0.06) from holding Biotech Medics Ne or give up 3.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Biotech Medics Ne
Performance |
| Timeline |
| General Motors |
| Biotech Medics Ne |
GM and Biotech Medics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Biotech Medics
The main advantage of trading using opposite GM and Biotech Medics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Biotech Medics 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 Biotech Medics will offset losses from the drop in Biotech Medics' long position.The idea behind General Motors and Biotech Medics Ne 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.| Biotech Medics vs. ANI Pharmaceuticals | Biotech Medics vs. Phibro Animal Health | Biotech Medics vs. Prestige Brand Holdings | Biotech Medics vs. Alpha Teknova |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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