Correlation Between M3 and GE HealthCare
Can any of the company-specific risk be diversified away by investing in both M3 and GE 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 M3 and GE HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between M3 Inc and GE HealthCare Technologies, you can compare the effects of market volatilities on M3 and GE 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 M3 with a short position of GE HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of M3 and GE HealthCare.
Diversification Opportunities for M3 and GE HealthCare
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between M3 and GEHC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding M3 Inc and GE HealthCare Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE HealthCare Techno and M3 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 M3 Inc are associated (or correlated) with GE HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE HealthCare Techno has no effect on the direction of M3 i.e., M3 and GE HealthCare go up and down completely randomly.
Pair Corralation between M3 and GE HealthCare
Assuming the 90 days horizon M3 Inc is expected to under-perform the GE HealthCare. In addition to that, M3 is 2.91 times more volatile than GE HealthCare Technologies. It trades about -0.13 of its total potential returns per unit of risk. GE HealthCare Technologies is currently generating about -0.09 per unit of volatility. If you would invest 8,593 in GE HealthCare Technologies on August 29, 2024 and sell it today you would lose (293.00) from holding GE HealthCare Technologies or give up 3.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
M3 Inc vs. GE HealthCare Technologies
Performance |
| Timeline |
| M3 Inc |
| GE HealthCare Techno |
M3 and GE HealthCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M3 and GE HealthCare
The main advantage of trading using opposite M3 and GE HealthCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M3 position performs unexpectedly, GE 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 GE HealthCare will offset losses from the drop in GE HealthCare's long position.The idea behind M3 Inc and GE HealthCare Technologies 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.| GE HealthCare vs. Teladoc | GE HealthCare vs. Veeva Systems Class | GE HealthCare vs. 10X Genomics | GE HealthCare vs. Progyny |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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