Correlation Between GM and Metacrine
Can any of the company-specific risk be diversified away by investing in both GM and Metacrine 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 Metacrine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Metacrine, you can compare the effects of market volatilities on GM and Metacrine 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 Metacrine. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Metacrine.
Diversification Opportunities for GM and Metacrine
Pay attention - limited upside
The 3 months correlation between GM and Metacrine is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Metacrine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metacrine 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 Metacrine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metacrine has no effect on the direction of GM i.e., GM and Metacrine go up and down completely randomly.
Pair Corralation between GM and Metacrine
Allowing for the 90-day total investment horizon GM is expected to generate 6.16 times less return on investment than Metacrine. But when comparing it to its historical volatility, General Motors is 2.04 times less risky than Metacrine. It trades about 0.05 of its potential returns per unit of risk. Metacrine is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 39.00 in Metacrine on August 29, 2024 and sell it today you would earn a total of 10.00 from holding Metacrine or generate 25.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 8.87% |
| Values | Daily Returns |
General Motors vs. Metacrine
Performance |
| Timeline |
| General Motors |
| Metacrine |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Metacrine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Metacrine
The main advantage of trading using opposite GM and Metacrine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Metacrine 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 Metacrine will offset losses from the drop in Metacrine's long position.The idea behind General Motors and Metacrine 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.| Metacrine vs. Protara Therapeutics | Metacrine vs. CytomX Therapeutics | Metacrine vs. Assembly Biosciences | Metacrine vs. Instil Bio |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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