Correlation Between GM and TG Therapeutics
Can any of the company-specific risk be diversified away by investing in both GM and TG Therapeutics 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 TG Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and TG Therapeutics, you can compare the effects of market volatilities on GM and TG Therapeutics 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 TG Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and TG Therapeutics.
Diversification Opportunities for GM and TG Therapeutics
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and TGTX is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and TG Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TG Therapeutics 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 TG Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TG Therapeutics has no effect on the direction of GM i.e., GM and TG Therapeutics go up and down completely randomly.
Pair Corralation between GM and TG Therapeutics
Allowing for the 90-day total investment horizon GM is expected to generate 4.66 times less return on investment than TG Therapeutics. But when comparing it to its historical volatility, General Motors is 2.7 times less risky than TG Therapeutics. It trades about 0.05 of its potential returns per unit of risk. TG Therapeutics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 816.00 in TG Therapeutics on August 24, 2024 and sell it today you would earn a total of 2,691 from holding TG Therapeutics or generate 329.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. TG Therapeutics
Performance |
| Timeline |
| General Motors |
| TG Therapeutics |
GM and TG Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and TG Therapeutics
The main advantage of trading using opposite GM and TG Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, TG Therapeutics 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 TG Therapeutics will offset losses from the drop in TG Therapeutics' long position.The idea behind General Motors and TG Therapeutics 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.| TG Therapeutics vs. Madrigal Pharmaceuticals | TG Therapeutics vs. Terns Pharmaceuticals | TG Therapeutics vs. Hepion Pharmaceuticals | TG Therapeutics vs. Exelixis |
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 CEOs Directory module to screen CEOs from public companies around the world.
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