Correlation Between GM and Farmaceutica
Can any of the company-specific risk be diversified away by investing in both GM and Farmaceutica 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 Farmaceutica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Farmaceutica R, you can compare the effects of market volatilities on GM and Farmaceutica 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 Farmaceutica. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Farmaceutica.
Diversification Opportunities for GM and Farmaceutica
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Farmaceutica is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Farmaceutica R in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmaceutica R 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 Farmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmaceutica R has no effect on the direction of GM i.e., GM and Farmaceutica go up and down completely randomly.
Pair Corralation between GM and Farmaceutica
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.28 times more return on investment than Farmaceutica. However, GM is 1.28 times more volatile than Farmaceutica R. It trades about 0.09 of its potential returns per unit of risk. Farmaceutica R is currently generating about 0.02 per unit of risk. If you would invest 3,508 in General Motors on September 12, 2024 and sell it today you would earn a total of 1,766 from holding General Motors or generate 50.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
General Motors vs. Farmaceutica R
Performance |
| Timeline |
| General Motors |
| Farmaceutica R |
GM and Farmaceutica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Farmaceutica
The main advantage of trading using opposite GM and Farmaceutica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Farmaceutica 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 Farmaceutica will offset losses from the drop in Farmaceutica's long position.The idea behind General Motors and Farmaceutica R 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.| Farmaceutica vs. IHUNT TECHNOLOGY IMPORT EXPORT | Farmaceutica vs. Biofarm Bucure | Farmaceutica vs. TRANSILVANIA LEASING SI | Farmaceutica vs. TRANSILVANIA INVESTMENTS ALLIANCE |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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