Correlation Between GM and Medical Packaging
Can any of the company-specific risk be diversified away by investing in both GM and Medical Packaging 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 Medical Packaging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Medical Packaging, you can compare the effects of market volatilities on GM and Medical Packaging 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 Medical Packaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Medical Packaging.
Diversification Opportunities for GM and Medical Packaging
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Medical is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Medical Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Packaging 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 Medical Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Packaging has no effect on the direction of GM i.e., GM and Medical Packaging go up and down completely randomly.
Pair Corralation between GM and Medical Packaging
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.59 times more return on investment than Medical Packaging. However, GM is 1.59 times more volatile than Medical Packaging. It trades about -0.16 of its potential returns per unit of risk. Medical Packaging is currently generating about -0.29 per unit of risk. If you would invest 5,728 in General Motors on September 13, 2024 and sell it today you would lose (515.50) from holding General Motors or give up 9.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 81.82% |
| Values | Daily Returns |
General Motors vs. Medical Packaging
Performance |
| Timeline |
| General Motors |
| Medical Packaging |
GM and Medical Packaging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Medical Packaging
The main advantage of trading using opposite GM and Medical Packaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Medical Packaging 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 Medical Packaging will offset losses from the drop in Medical Packaging's long position.The idea behind General Motors and Medical Packaging 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.| Medical Packaging vs. Orascom Financial Holding | Medical Packaging vs. Misr National Steel | Medical Packaging vs. Commercial International Bank Egypt | Medical Packaging vs. Fawry For Banking |
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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