Correlation Between GM and NIGHTINGALE HEALTH

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

Diversification Opportunities for GM and NIGHTINGALE HEALTH

0.28

Correlation Coefficient

GM  NIGHTINGALE HEALTH

Modest diversification

The 3 months correlation between GM and NIGHTINGALE is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and NIGHTINGALE HEALTH EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIGHTINGALE 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 NIGHTINGALE HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIGHTINGALE HEALTH has no effect on the direction of GM i.e., GM and NIGHTINGALE HEALTH go up and down completely randomly.

Pair Corralation between GM and NIGHTINGALE HEALTH

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the NIGHTINGALE HEALTH. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.51 times less risky than NIGHTINGALE HEALTH. The stock trades about -0.02 of its potential returns per unit of risk. The NIGHTINGALE HEALTH EO is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  263.00  in NIGHTINGALE HEALTH EO on December 20, 2024 and sell it today you would earn a total of  80.00  from holding NIGHTINGALE HEALTH EO or generate 30.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  NIGHTINGALE HEALTH EO

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 very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

NIGHTINGALE HEALTH

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NIGHTINGALE HEALTH EO are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NIGHTINGALE HEALTH reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and NIGHTINGALE HEALTH

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

The idea behind General Motors and NIGHTINGALE HEALTH EO 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 Global Correlations module to find global opportunities by holding instruments from different markets.