Correlation Between GM and Naturhouse Health

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

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

Diversification Opportunities for GM and Naturhouse Health

-0.13

Correlation Coefficient

GM  Naturhouse Health

Good diversification

The 3 months correlation between GM and Naturhouse is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Naturhouse Health SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naturhouse Health 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 Naturhouse Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naturhouse Health has no effect on the direction of GM i.e., GM and Naturhouse Health go up and down completely randomly.

Pair Corralation between GM and Naturhouse Health

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.04 times more return on investment than Naturhouse Health. However, GM is 2.04 times more volatile than Naturhouse Health SA. It trades about 0.1 of its potential returns per unit of risk. Naturhouse Health SA is currently generating about -0.08 per unit of risk. If you would invest  4,829  in General Motors on September 2, 2024 and sell it today you would earn a total of  730.00  from holding General Motors or generate 15.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.97%
Values	Daily Returns

General Motors  vs.  Naturhouse Health SA

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Naturhouse Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Naturhouse Health SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with GM and Naturhouse Health

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

The idea behind General Motors and Naturhouse Health SA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.