Correlation Between GM and Purple Biotech
Can any of the company-specific risk be diversified away by investing in both GM and Purple Biotech 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 Purple Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Purple Biotech, you can compare the effects of market volatilities on GM and Purple Biotech 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 Purple Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Purple Biotech.
Diversification Opportunities for GM and Purple Biotech
-0.92 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Purple is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Purple Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purple Biotech 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 Purple Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purple Biotech has no effect on the direction of GM i.e., GM and Purple Biotech go up and down completely randomly.
Pair Corralation between GM and Purple Biotech
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.32 times more return on investment than Purple Biotech. However, General Motors is 3.09 times less risky than Purple Biotech. It trades about 0.11 of its potential returns per unit of risk. Purple Biotech is currently generating about -0.12 per unit of risk. If you would invest 3,324 in General Motors on September 2, 2024 and sell it today you would earn a total of 2,235 from holding General Motors or generate 67.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 76.61% |
| Values | Daily Returns |
General Motors vs. Purple Biotech
Performance |
| Timeline |
| General Motors |
| Purple Biotech |
GM and Purple Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Purple Biotech
The main advantage of trading using opposite GM and Purple Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Purple Biotech 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 Purple Biotech will offset losses from the drop in Purple Biotech's long position.The idea behind General Motors and Purple Biotech 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.| Purple Biotech vs. Bezeq Israeli Telecommunication | Purple Biotech vs. Brainsway | Purple Biotech vs. Mivne Real Estate | Purple Biotech vs. Photomyne |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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