Correlation Between GM and Insulet
Can any of the company-specific risk be diversified away by investing in both GM and Insulet 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 Insulet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Insulet, you can compare the effects of market volatilities on GM and Insulet 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 Insulet. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Insulet.
Diversification Opportunities for GM and Insulet
Poor diversification
The 3 months correlation between GM and Insulet is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Insulet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insulet 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 Insulet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insulet has no effect on the direction of GM i.e., GM and Insulet go up and down completely randomly.
Pair Corralation between GM and Insulet
Allowing for the 90-day total investment horizon GM is expected to generate 2.05 times less return on investment than Insulet. In addition to that, GM is 1.17 times more volatile than Insulet. It trades about 0.12 of its total potential returns per unit of risk. Insulet is currently generating about 0.29 per unit of volatility. If you would invest 23,058 in Insulet on August 31, 2024 and sell it today you would earn a total of 3,634 from holding Insulet or generate 15.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Insulet
Performance |
| Timeline |
| General Motors |
| Insulet |
GM and Insulet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Insulet
The main advantage of trading using opposite GM and Insulet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Insulet 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 Insulet will offset losses from the drop in Insulet's long position.The idea behind General Motors and Insulet 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.| Insulet vs. Abbott Laboratories | Insulet vs. Medtronic PLC | Insulet vs. Edwards Lifesciences Corp | Insulet vs. ZimVie Inc |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |