Correlation Between GM and Cengild Medical

Can any of the company-specific risk be diversified away by investing in both GM and Cengild Medical 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 Cengild Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Cengild Medical Berhad, you can compare the effects of market volatilities on GM and Cengild Medical 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 Cengild Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Cengild Medical.

Diversification Opportunities for GM and Cengild Medical

-0.2

Correlation Coefficient

GM  Cengild Medical

Good diversification

The 3 months correlation between GM and Cengild is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Cengild Medical Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cengild Medical Berhad 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 Cengild Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cengild Medical Berhad has no effect on the direction of GM i.e., GM and Cengild Medical go up and down completely randomly.

Pair Corralation between GM and Cengild Medical

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Cengild Medical. In addition to that, GM is 1.29 times more volatile than Cengild Medical Berhad. It trades about -0.06 of its total potential returns per unit of risk. Cengild Medical Berhad is currently generating about -0.02 per unit of volatility. If you would invest  27.00  in Cengild Medical Berhad on December 29, 2024 and sell it today you would lose (1.00) from holding Cengild Medical Berhad or give up 3.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

General Motors  vs.  Cengild Medical Berhad

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Cengild Medical Berhad

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cengild Medical Berhad has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Cengild Medical is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GM and Cengild Medical

The main advantage of trading using opposite GM and Cengild Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Cengild Medical 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 Cengild Medical will offset losses from the drop in Cengild Medical's long position.

The idea behind General Motors and Cengild Medical Berhad 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.