Correlation Between GM and China Medical
Can any of the company-specific risk be diversified away by investing in both GM and China Medical 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 China Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and China Medical System, you can compare the effects of market volatilities on GM and China Medical 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 China Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and China Medical.
Diversification Opportunities for GM and China Medical
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and China Medical System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Medical System 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 China Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Medical System has no effect on the direction of GM i.e., GM and China Medical go up and down completely randomly.
Pair Corralation between GM and China Medical
If you would invest 5,096 in General Motors on September 2, 2024 and sell it today you would earn a total of 463.00 from holding General Motors or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 4.76% |
| Values | Daily Returns |
General Motors vs. China Medical System
Performance |
| Timeline |
| General Motors |
| China Medical System |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and China Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and China Medical
The main advantage of trading using opposite GM and China Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, China Medical 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 China Medical will offset losses from the drop in China Medical's long position.The idea behind General Motors and China Medical System 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.| China Medical vs. Eisai Co | China Medical vs. Dr Reddys Laboratories | China Medical vs. ANI Pharmaceuticals | China Medical vs. Lantheus Holdings |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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