Correlation Between GM and Tekla Healthcare
Can any of the company-specific risk be diversified away by investing in both GM and Tekla Healthcare 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 Tekla Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Tekla Healthcare Opportunities, you can compare the effects of market volatilities on GM and Tekla Healthcare 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 Tekla Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Tekla Healthcare.
Diversification Opportunities for GM and Tekla Healthcare
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Tekla is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Tekla Healthcare Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla Healthcare Opp 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 Tekla Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekla Healthcare Opp has no effect on the direction of GM i.e., GM and Tekla Healthcare go up and down completely randomly.
Pair Corralation between GM and Tekla Healthcare
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.5 times more return on investment than Tekla Healthcare. However, GM is 1.5 times more volatile than Tekla Healthcare Opportunities. It trades about 0.24 of its potential returns per unit of risk. Tekla Healthcare Opportunities is currently generating about -0.27 per unit of risk. If you would invest 5,292 in General Motors on August 24, 2024 and sell it today you would earn a total of 561.00 from holding General Motors or generate 10.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Tekla Healthcare Opportunities
Performance |
| Timeline |
| General Motors |
| Tekla Healthcare Opp |
GM and Tekla Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Tekla Healthcare
The main advantage of trading using opposite GM and Tekla Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Tekla Healthcare 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 Tekla Healthcare will offset losses from the drop in Tekla Healthcare's long position.The idea behind General Motors and Tekla Healthcare Opportunities 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.| Tekla Healthcare vs. MFS Investment Grade | Tekla Healthcare vs. Eaton Vance National | Tekla Healthcare vs. Blackrock Muniyield Quality | Tekla Healthcare vs. Munivest Fund |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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