Correlation Between GM and Grifols SA
Can any of the company-specific risk be diversified away by investing in both GM and Grifols SA 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 Grifols SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Grifols SA ADR, you can compare the effects of market volatilities on GM and Grifols SA 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 Grifols SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Grifols SA.
Diversification Opportunities for GM and Grifols SA
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and Grifols is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Grifols SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grifols SA ADR 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 Grifols SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grifols SA ADR has no effect on the direction of GM i.e., GM and Grifols SA go up and down completely randomly.
Pair Corralation between GM and Grifols SA
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.83 times more return on investment than Grifols SA. However, General Motors is 1.2 times less risky than Grifols SA. It trades about 0.12 of its potential returns per unit of risk. Grifols SA ADR is currently generating about -0.1 per unit of risk. If you would invest 5,197 in General Motors on August 31, 2024 and sell it today you would earn a total of 353.00 from holding General Motors or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Grifols SA ADR
Performance |
| Timeline |
| General Motors |
| Grifols SA ADR |
GM and Grifols SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Grifols SA
The main advantage of trading using opposite GM and Grifols SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Grifols SA 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 Grifols SA will offset losses from the drop in Grifols SA's long position.The idea behind General Motors and Grifols SA ADR 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.| Grifols SA vs. Novartis AG ADR | Grifols SA vs. AstraZeneca PLC ADR | Grifols SA vs. GlaxoSmithKline PLC ADR | Grifols SA vs. Roche Holding Ltd |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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