Correlation Between GM and Medibank Private
Can any of the company-specific risk be diversified away by investing in both GM and Medibank Private 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 Medibank Private into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Medibank Private, you can compare the effects of market volatilities on GM and Medibank Private 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 Medibank Private. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Medibank Private.
Diversification Opportunities for GM and Medibank Private
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Medibank is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Medibank Private in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medibank Private 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 Medibank Private. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medibank Private has no effect on the direction of GM i.e., GM and Medibank Private go up and down completely randomly.
Pair Corralation between GM and Medibank Private
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.73 times more return on investment than Medibank Private. However, GM is 1.73 times more volatile than Medibank Private. It trades about 0.05 of its potential returns per unit of risk. Medibank Private is currently generating about 0.06 per unit of risk. If you would invest 3,313 in General Motors on September 13, 2024 and sell it today you would earn a total of 1,917 from holding General Motors or generate 57.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
General Motors vs. Medibank Private
Performance |
| Timeline |
| General Motors |
| Medibank Private |
GM and Medibank Private Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Medibank Private
The main advantage of trading using opposite GM and Medibank Private positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Medibank Private 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 Medibank Private will offset losses from the drop in Medibank Private's long position.The idea behind General Motors and Medibank Private 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.| Medibank Private vs. Westpac Banking | Medibank Private vs. National Australia Bank | Medibank Private vs. National Australia Bank | Medibank Private vs. National Australia Bank |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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