Correlation Between GM and Chugai Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both GM and Chugai Pharmaceutical 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 Chugai Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Chugai Pharmaceutical Co, you can compare the effects of market volatilities on GM and Chugai Pharmaceutical 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 Chugai Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Chugai Pharmaceutical.
Diversification Opportunities for GM and Chugai Pharmaceutical
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Chugai is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Chugai Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chugai Pharmaceutical 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 Chugai Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chugai Pharmaceutical has no effect on the direction of GM i.e., GM and Chugai Pharmaceutical go up and down completely randomly.
Pair Corralation between GM and Chugai Pharmaceutical
Allowing for the 90-day total investment horizon GM is expected to generate 2.23 times less return on investment than Chugai Pharmaceutical. But when comparing it to its historical volatility, General Motors is 1.43 times less risky than Chugai Pharmaceutical. It trades about 0.05 of its potential returns per unit of risk. Chugai Pharmaceutical Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,286 in Chugai Pharmaceutical Co on September 3, 2024 and sell it today you would earn a total of 2,348 from holding Chugai Pharmaceutical Co or generate 102.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 81.41% |
| Values | Daily Returns |
General Motors vs. Chugai Pharmaceutical Co
Performance |
| Timeline |
| General Motors |
| Chugai Pharmaceutical |
GM and Chugai Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Chugai Pharmaceutical
The main advantage of trading using opposite GM and Chugai Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Chugai Pharmaceutical 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 Chugai Pharmaceutical will offset losses from the drop in Chugai Pharmaceutical's long position.The idea behind General Motors and Chugai Pharmaceutical Co 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.| Chugai Pharmaceutical vs. Sanofi ADR | Chugai Pharmaceutical vs. Bristol Myers Squibb | Chugai Pharmaceutical vs. AstraZeneca PLC ADR | Chugai Pharmaceutical vs. Gilead Sciences |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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