Correlation Between GM and Illumina
Can any of the company-specific risk be diversified away by investing in both GM and Illumina 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 Illumina into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Illumina, you can compare the effects of market volatilities on GM and Illumina 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 Illumina. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Illumina.
Diversification Opportunities for GM and Illumina
Very weak diversification
The 3 months correlation between GM and Illumina is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Illumina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illumina 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 Illumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illumina has no effect on the direction of GM i.e., GM and Illumina go up and down completely randomly.
Pair Corralation between GM and Illumina
Allowing for the 90-day total investment horizon GM is expected to generate 1.14 times less return on investment than Illumina. But when comparing it to its historical volatility, General Motors is 1.18 times less risky than Illumina. It trades about 0.11 of its potential returns per unit of risk. Illumina is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 10,217 in Illumina on August 24, 2024 and sell it today you would earn a total of 3,482 from holding Illumina or generate 34.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
General Motors vs. Illumina
Performance |
| Timeline |
| General Motors |
| Illumina |
GM and Illumina Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Illumina
The main advantage of trading using opposite GM and Illumina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Illumina 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 Illumina will offset losses from the drop in Illumina's long position.The idea behind General Motors and Illumina 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.| Illumina vs. Thermo Fisher Scientific | Illumina vs. Danaher | Illumina vs. Waters | Illumina vs. IDEXX Laboratories |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |