Correlation Between GM and Gabelli Healthcare
Can any of the company-specific risk be diversified away by investing in both GM and Gabelli 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 Gabelli 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 The Gabelli Healthcare, you can compare the effects of market volatilities on GM and Gabelli 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 Gabelli Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Gabelli Healthcare.
Diversification Opportunities for GM and Gabelli Healthcare
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Gabelli is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and The Gabelli Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Gabelli Healthcare 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 Gabelli Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Gabelli Healthcare has no effect on the direction of GM i.e., GM and Gabelli Healthcare go up and down completely randomly.
Pair Corralation between GM and Gabelli Healthcare
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.36 times more return on investment than Gabelli Healthcare. However, GM is 2.36 times more volatile than The Gabelli Healthcare. It trades about 0.05 of its potential returns per unit of risk. The Gabelli Healthcare is currently generating about 0.0 per unit of risk. If you would invest 3,749 in General Motors on August 29, 2024 and sell it today you would earn a total of 1,801 from holding General Motors or generate 48.04% 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. The Gabelli Healthcare
Performance |
| Timeline |
| General Motors |
| The Gabelli Healthcare |
GM and Gabelli Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Gabelli Healthcare
The main advantage of trading using opposite GM and Gabelli Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Gabelli 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 Gabelli Healthcare will offset losses from the drop in Gabelli Healthcare's long position.The idea behind General Motors and The Gabelli Healthcare 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.| Gabelli Healthcare vs. Vanguard Total Stock | Gabelli Healthcare vs. Vanguard 500 Index | Gabelli Healthcare vs. Vanguard Total Stock | Gabelli Healthcare vs. Vanguard Total Stock |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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