Correlation Between GM and Forward Pharma
Can any of the company-specific risk be diversified away by investing in both GM and Forward Pharma 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 Forward Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Forward Pharma A, you can compare the effects of market volatilities on GM and Forward Pharma 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 Forward Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Forward Pharma.
Diversification Opportunities for GM and Forward Pharma
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Forward is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Forward Pharma A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Pharma A 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 Forward Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forward Pharma A has no effect on the direction of GM i.e., GM and Forward Pharma go up and down completely randomly.
Pair Corralation between GM and Forward Pharma
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 | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
General Motors vs. Forward Pharma A
Performance |
| Timeline |
| General Motors |
| Forward Pharma A |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Forward Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Forward Pharma
The main advantage of trading using opposite GM and Forward Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Forward Pharma 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 Forward Pharma will offset losses from the drop in Forward Pharma's long position.The idea behind General Motors and Forward Pharma A 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.| Forward Pharma vs. Centessa Pharmaceuticals PLC | Forward Pharma vs. Omni Health | Forward Pharma vs. Xponential Fitness | Forward Pharma vs. Valneva SE ADR |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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