Correlation Between GM and EVE Health
Can any of the company-specific risk be diversified away by investing in both GM and EVE Health 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 EVE Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and EVE Health Group, you can compare the effects of market volatilities on GM and EVE Health 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 EVE Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and EVE Health.
Diversification Opportunities for GM and EVE Health
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and EVE is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and EVE Health Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVE Health Group 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 EVE Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVE Health Group has no effect on the direction of GM i.e., GM and EVE Health go up and down completely randomly.
Pair Corralation between GM and EVE Health
Allowing for the 90-day total investment horizon GM is expected to generate 2.55 times less return on investment than EVE Health. But when comparing it to its historical volatility, General Motors is 3.79 times less risky than EVE Health. It trades about 0.05 of its potential returns per unit of risk. EVE Health Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 0.10 in EVE Health Group on August 29, 2024 and sell it today you would earn a total of 0.00 from holding EVE Health Group or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
General Motors vs. EVE Health Group
Performance |
| Timeline |
| General Motors |
| EVE Health Group |
GM and EVE Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and EVE Health
The main advantage of trading using opposite GM and EVE Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, EVE Health 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 EVE Health will offset losses from the drop in EVE Health's long position.The idea behind General Motors and EVE Health Group 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.| EVE Health vs. Champion Iron | EVE Health vs. Ridley | EVE Health vs. Peel Mining | EVE Health vs. Australian Dairy Farms |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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