Correlation Between GM and Codexis
Can any of the company-specific risk be diversified away by investing in both GM and Codexis 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 Codexis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Codexis, you can compare the effects of market volatilities on GM and Codexis 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 Codexis. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Codexis.
Diversification Opportunities for GM and Codexis
Very poor diversification
The 3 months correlation between GM and Codexis is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Codexis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Codexis 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 Codexis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Codexis has no effect on the direction of GM i.e., GM and Codexis go up and down completely randomly.
Pair Corralation between GM and Codexis
Allowing for the 90-day total investment horizon GM is expected to generate 2.78 times less return on investment than Codexis. But when comparing it to its historical volatility, General Motors is 2.16 times less risky than Codexis. It trades about 0.32 of its potential returns per unit of risk. Codexis is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 318.00 in Codexis on August 28, 2024 and sell it today you would earn a total of 137.00 from holding Codexis or generate 43.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Codexis
Performance |
| Timeline |
| General Motors |
| Codexis |
GM and Codexis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Codexis
The main advantage of trading using opposite GM and Codexis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Codexis 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 Codexis will offset losses from the drop in Codexis' long position.The idea behind General Motors and Codexis 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.| Codexis vs. Nuvation Bio | Codexis vs. Lyell Immunopharma | Codexis vs. Century Therapeutics | Codexis vs. Generation Bio Co |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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