Correlation Between GM and APT Medical

Can any of the company-specific risk be diversified away by investing in both GM and APT 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 APT 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 APT Medical, you can compare the effects of market volatilities on GM and APT 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 APT Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and APT Medical.

Diversification Opportunities for GM and APT Medical

-0.06

Correlation Coefficient

GM  APT Medical

Good diversification

The 3 months correlation between GM and APT is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and APT Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APT Medical 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 APT Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APT Medical has no effect on the direction of GM i.e., GM and APT Medical go up and down completely randomly.

Pair Corralation between GM and APT Medical

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.63 times more return on investment than APT Medical. However, General Motors is 1.59 times less risky than APT Medical. It trades about 0.1 of its potential returns per unit of risk. APT Medical is currently generating about 0.03 per unit of risk. If you would invest  4,829  in General Motors on August 31, 2024 and sell it today you would earn a total of  721.00  from holding General Motors or generate 14.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

General Motors  vs.  APT Medical

General Motors

Risk-Adjusted Performance

7 of 100

Modest

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.

APT Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in APT Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, APT Medical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with GM and APT Medical

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

The idea behind General Motors and APT Medical 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..