Correlation Between GM and Swedish Orphan
Can any of the company-specific risk be diversified away by investing in both GM and Swedish Orphan 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 Swedish Orphan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Swedish Orphan Biovitrum, you can compare the effects of market volatilities on GM and Swedish Orphan 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 Swedish Orphan. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Swedish Orphan.
Diversification Opportunities for GM and Swedish Orphan
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Swedish is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Swedish Orphan Biovitrum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedish Orphan Biovitrum 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 Swedish Orphan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedish Orphan Biovitrum has no effect on the direction of GM i.e., GM and Swedish Orphan go up and down completely randomly.
Pair Corralation between GM and Swedish Orphan
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.09 times more return on investment than Swedish Orphan. However, GM is 1.09 times more volatile than Swedish Orphan Biovitrum. It trades about 0.08 of its potential returns per unit of risk. Swedish Orphan Biovitrum is currently generating about 0.03 per unit of risk. If you would invest 4,551 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,008 from holding General Motors or generate 22.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
General Motors vs. Swedish Orphan Biovitrum
Performance |
| Timeline |
| General Motors |
| Swedish Orphan Biovitrum |
GM and Swedish Orphan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Swedish Orphan
The main advantage of trading using opposite GM and Swedish Orphan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Swedish Orphan 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 Swedish Orphan will offset losses from the drop in Swedish Orphan's long position.The idea behind General Motors and Swedish Orphan Biovitrum 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.| Swedish Orphan vs. Kancera AB | Swedish Orphan vs. Cyxone AB | Swedish Orphan vs. Lidds AB | Swedish Orphan vs. Cantargia AB |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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