Correlation Between GM and Ipsen SA
Can any of the company-specific risk be diversified away by investing in both GM and Ipsen 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 Ipsen 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 Ipsen SA, you can compare the effects of market volatilities on GM and Ipsen 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 Ipsen SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Ipsen SA.
Diversification Opportunities for GM and Ipsen SA
Very good diversification
The 3 months correlation between GM and Ipsen is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ipsen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ipsen SA 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 Ipsen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ipsen SA has no effect on the direction of GM i.e., GM and Ipsen SA go up and down completely randomly.
Pair Corralation between GM and Ipsen SA
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Ipsen SA. In addition to that, GM is 1.64 times more volatile than Ipsen SA. It trades about 0.0 of its total potential returns per unit of risk. Ipsen SA is currently generating about 0.3 per unit of volatility. If you would invest 11,060 in Ipsen SA on October 26, 2024 and sell it today you would earn a total of 910.00 from holding Ipsen SA or generate 8.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Ipsen SA
Performance |
| Timeline |
| General Motors |
| Ipsen SA |
GM and Ipsen SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Ipsen SA
The main advantage of trading using opposite GM and Ipsen SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Ipsen 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 Ipsen SA will offset losses from the drop in Ipsen SA's long position.The idea behind General Motors and Ipsen SA 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.| Ipsen SA vs. Biomerieux SA | Ipsen SA vs. Eurofins Scientific SE | Ipsen SA vs. Sartorius Stedim Biotech | Ipsen SA vs. Arkema SA |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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