Correlation Between GM and Medical Equipment
Can any of the company-specific risk be diversified away by investing in both GM and Medical Equipment 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 Medical Equipment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Medical Equipment And, you can compare the effects of market volatilities on GM and Medical Equipment 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 Medical Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Medical Equipment.
Diversification Opportunities for GM and Medical Equipment
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Medical is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Medical Equipment And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Equipment And 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 Medical Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Equipment And has no effect on the direction of GM i.e., GM and Medical Equipment go up and down completely randomly.
Pair Corralation between GM and Medical Equipment
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.06 times more return on investment than Medical Equipment. However, GM is 2.06 times more volatile than Medical Equipment And. It trades about 0.05 of its potential returns per unit of risk. Medical Equipment And is currently generating about 0.02 per unit of risk. If you would invest 3,805 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,754 from holding General Motors or generate 46.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Medical Equipment And
Performance |
| Timeline |
| General Motors |
| Medical Equipment And |
GM and Medical Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Medical Equipment
The main advantage of trading using opposite GM and Medical Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Medical Equipment 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 Medical Equipment will offset losses from the drop in Medical Equipment's long position.The idea behind General Motors and Medical Equipment And 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.| Medical Equipment vs. Software And It | Medical Equipment vs. Health Care Services | Medical Equipment vs. Retailing Portfolio Retailing | Medical Equipment vs. Health Care Portfolio |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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