Correlation Between GM and HBM Healthcare
Can any of the company-specific risk be diversified away by investing in both GM and HBM Healthcare 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 HBM Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and HBM Healthcare Investments, you can compare the effects of market volatilities on GM and HBM Healthcare 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 HBM Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and HBM Healthcare.
Diversification Opportunities for GM and HBM Healthcare
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and HBM is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and HBM Healthcare Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HBM Healthcare Inves 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 HBM Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HBM Healthcare Inves has no effect on the direction of GM i.e., GM and HBM Healthcare go up and down completely randomly.
Pair Corralation between GM and HBM Healthcare
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.11 times more return on investment than HBM Healthcare. However, GM is 1.11 times more volatile than HBM Healthcare Investments. It trades about 0.07 of its potential returns per unit of risk. HBM Healthcare Investments is currently generating about 0.0 per unit of risk. If you would invest 3,311 in General Motors on August 29, 2024 and sell it today you would earn a total of 2,168 from holding General Motors or generate 65.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.75% |
| Values | Daily Returns |
General Motors vs. HBM Healthcare Investments
Performance |
| Timeline |
| General Motors |
| HBM Healthcare Inves |
GM and HBM Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and HBM Healthcare
The main advantage of trading using opposite GM and HBM Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, HBM Healthcare 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 HBM Healthcare will offset losses from the drop in HBM Healthcare's long position.The idea behind General Motors and HBM Healthcare Investments 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.| HBM Healthcare vs. BB Biotech AG | HBM Healthcare vs. Partners Group Holding | HBM Healthcare vs. Tecan Group AG | HBM Healthcare vs. VAT Group AG |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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