Correlation Between GM and Eventide Gilead
Can any of the company-specific risk be diversified away by investing in both GM and Eventide Gilead 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 Eventide Gilead into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Eventide Gilead, you can compare the effects of market volatilities on GM and Eventide Gilead 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 Eventide Gilead. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Eventide Gilead.
Diversification Opportunities for GM and Eventide Gilead
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Eventide is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Eventide Gilead in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eventide Gilead 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 Eventide Gilead. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eventide Gilead has no effect on the direction of GM i.e., GM and Eventide Gilead go up and down completely randomly.
Pair Corralation between GM and Eventide Gilead
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.7 times more return on investment than Eventide Gilead. However, GM is 1.7 times more volatile than Eventide Gilead. It trades about 0.07 of its potential returns per unit of risk. Eventide Gilead is currently generating about 0.04 per unit of risk. If you would invest 3,536 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,023 from holding General Motors or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Eventide Gilead
Performance |
| Timeline |
| General Motors |
| Eventide Gilead |
GM and Eventide Gilead Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Eventide Gilead
The main advantage of trading using opposite GM and Eventide Gilead positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Eventide Gilead 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 Eventide Gilead will offset losses from the drop in Eventide Gilead's long position.The idea behind General Motors and Eventide Gilead 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.| Eventide Gilead vs. Eventide Core Bond | Eventide Gilead vs. Eventide Multi Asset Income | Eventide Gilead vs. Eventide Exponential Technologies | Eventide Gilead vs. Eventide Global Dividend |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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