Correlation Between GM and Astellas Pharma
Can any of the company-specific risk be diversified away by investing in both GM and Astellas Pharma 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 Astellas Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Astellas Pharma, you can compare the effects of market volatilities on GM and Astellas Pharma 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 Astellas Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Astellas Pharma.
Diversification Opportunities for GM and Astellas Pharma
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Astellas is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Astellas Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astellas Pharma 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 Astellas Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astellas Pharma has no effect on the direction of GM i.e., GM and Astellas Pharma go up and down completely randomly.
Pair Corralation between GM and Astellas Pharma
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.5 times more return on investment than Astellas Pharma. However, GM is 2.5 times more volatile than Astellas Pharma. It trades about 0.13 of its potential returns per unit of risk. Astellas Pharma is currently generating about -0.38 per unit of risk. If you would invest 5,154 in General Motors on August 30, 2024 and sell it today you would earn a total of 396.00 from holding General Motors or generate 7.68% 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. Astellas Pharma
Performance |
| Timeline |
| General Motors |
| Astellas Pharma |
GM and Astellas Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Astellas Pharma
The main advantage of trading using opposite GM and Astellas Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Astellas Pharma 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 Astellas Pharma will offset losses from the drop in Astellas Pharma's long position.The idea behind General Motors and Astellas Pharma 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.| Astellas Pharma vs. International Consolidated Airlines | Astellas Pharma vs. Tradeweb Markets | Astellas Pharma vs. National Retail Properties | Astellas Pharma vs. TRADEDOUBLER AB SK |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |