Correlation Between GM and Mind Medicine
Can any of the company-specific risk be diversified away by investing in both GM and Mind Medicine 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 Mind Medicine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Mind Medicine, you can compare the effects of market volatilities on GM and Mind Medicine 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 Mind Medicine. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Mind Medicine.
Diversification Opportunities for GM and Mind Medicine
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Mind is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mind Medicine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mind Medicine 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 Mind Medicine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mind Medicine has no effect on the direction of GM i.e., GM and Mind Medicine go up and down completely randomly.
Pair Corralation between GM and Mind Medicine
Allowing for the 90-day total investment horizon GM is expected to generate 4.14 times less return on investment than Mind Medicine. But when comparing it to its historical volatility, General Motors is 2.25 times less risky than Mind Medicine. It trades about 0.12 of its potential returns per unit of risk. Mind Medicine is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 634.00 in Mind Medicine on August 31, 2024 and sell it today you would earn a total of 192.00 from holding Mind Medicine or generate 30.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Mind Medicine
Performance |
| Timeline |
| General Motors |
| Mind Medicine |
GM and Mind Medicine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Mind Medicine
The main advantage of trading using opposite GM and Mind Medicine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Mind Medicine 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 Mind Medicine will offset losses from the drop in Mind Medicine's long position.The idea behind General Motors and Mind Medicine 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.| Mind Medicine vs. Cue Biopharma | Mind Medicine vs. Tff Pharmaceuticals | Mind Medicine vs. Eliem Therapeutics | Mind Medicine vs. Inhibrx |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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