Correlation Between GM and Vertex Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both GM and Vertex Pharmaceuticals 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 Vertex Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Vertex Pharmaceuticals Incorporated, you can compare the effects of market volatilities on GM and Vertex Pharmaceuticals 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 Vertex Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Vertex Pharmaceuticals.
Diversification Opportunities for GM and Vertex Pharmaceuticals
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Vertex is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Vertex Pharmaceuticals Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex Pharmaceuticals 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 Vertex Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertex Pharmaceuticals has no effect on the direction of GM i.e., GM and Vertex Pharmaceuticals go up and down completely randomly.
Pair Corralation between GM and Vertex Pharmaceuticals
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Vertex Pharmaceuticals. In addition to that, GM is 2.2 times more volatile than Vertex Pharmaceuticals Incorporated. It trades about -0.06 of its total potential returns per unit of risk. Vertex Pharmaceuticals Incorporated is currently generating about 0.41 per unit of volatility. If you would invest 39,505 in Vertex Pharmaceuticals Incorporated on November 4, 2024 and sell it today you would earn a total of 5,010 from holding Vertex Pharmaceuticals Incorporated or generate 12.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
General Motors vs. Vertex Pharmaceuticals Incorpo
Performance |
| Timeline |
| General Motors |
| Vertex Pharmaceuticals |
GM and Vertex Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Vertex Pharmaceuticals
The main advantage of trading using opposite GM and Vertex Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Vertex Pharmaceuticals 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 Vertex Pharmaceuticals will offset losses from the drop in Vertex Pharmaceuticals' long position.The idea behind General Motors and Vertex Pharmaceuticals Incorporated 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.| Vertex Pharmaceuticals vs. UPDATE SOFTWARE | Vertex Pharmaceuticals vs. UNIVMUSIC GRPADR050 | Vertex Pharmaceuticals vs. UNIVERSAL MUSIC GROUP | Vertex Pharmaceuticals vs. Beta Systems Software |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |