Correlation Between GM and Medirom Healthcare
Can any of the company-specific risk be diversified away by investing in both GM and Medirom Healthcare 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 Medirom Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Medirom Healthcare Technologies, you can compare the effects of market volatilities on GM and Medirom Healthcare 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 Medirom Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Medirom Healthcare.
Diversification Opportunities for GM and Medirom Healthcare
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Medirom is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Medirom Healthcare Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medirom Healthcare 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 Medirom Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medirom Healthcare has no effect on the direction of GM i.e., GM and Medirom Healthcare go up and down completely randomly.
Pair Corralation between GM and Medirom Healthcare
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.27 times more return on investment than Medirom Healthcare. However, General Motors is 3.66 times less risky than Medirom Healthcare. It trades about 0.03 of its potential returns per unit of risk. Medirom Healthcare Technologies is currently generating about -0.15 per unit of risk. If you would invest 5,261 in General Motors on October 26, 2024 and sell it today you would earn a total of 161.00 from holding General Motors or generate 3.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Medirom Healthcare Technologie
Performance |
| Timeline |
| General Motors |
| Medirom Healthcare |
GM and Medirom Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Medirom Healthcare
The main advantage of trading using opposite GM and Medirom Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Medirom Healthcare 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 Medirom Healthcare will offset losses from the drop in Medirom Healthcare's long position.The idea behind General Motors and Medirom Healthcare Technologies 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.| Medirom Healthcare vs. HR Block | Medirom Healthcare vs. Service International | Medirom Healthcare vs. Rollins | Medirom Healthcare vs. WW International |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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