Correlation Between GM and Japan Medical
Can any of the company-specific risk be diversified away by investing in both GM and Japan Medical 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 Japan Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Japan Medical Dynamic, you can compare the effects of market volatilities on GM and Japan Medical 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 Japan Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Japan Medical.
Diversification Opportunities for GM and Japan Medical
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Japan is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Japan Medical Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Medical Dynamic 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 Japan Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Medical Dynamic has no effect on the direction of GM i.e., GM and Japan Medical go up and down completely randomly.
Pair Corralation between GM and Japan Medical
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.28 times more return on investment than Japan Medical. However, GM is 1.28 times more volatile than Japan Medical Dynamic. It trades about 0.04 of its potential returns per unit of risk. Japan Medical Dynamic is currently generating about 0.03 per unit of risk. If you would invest 5,351 in General Motors on October 25, 2024 and sell it today you would earn a total of 71.00 from holding General Motors or generate 1.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
General Motors vs. Japan Medical Dynamic
Performance |
| Timeline |
| General Motors |
| Japan Medical Dynamic |
GM and Japan Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Japan Medical
The main advantage of trading using opposite GM and Japan Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Japan Medical 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 Japan Medical will offset losses from the drop in Japan Medical's long position.The idea behind General Motors and Japan Medical Dynamic 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.| Japan Medical vs. Abbott Laboratories | Japan Medical vs. Abbott Laboratories | Japan Medical vs. Medtronic PLC | Japan Medical vs. Stryker |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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