Correlation Between GM and Aspen Pharmacare

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

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

Diversification Opportunities for GM and Aspen Pharmacare

-0.35

Correlation Coefficient

GM  Aspen Pharmacare

Very good diversification

The 3 months correlation between GM and Aspen is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Aspen Pharmacare Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Pharmacare Holdings 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 Aspen Pharmacare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Pharmacare Holdings has no effect on the direction of GM i.e., GM and Aspen Pharmacare go up and down completely randomly.

Pair Corralation between GM and Aspen Pharmacare

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Aspen Pharmacare. In addition to that, GM is 1.12 times more volatile than Aspen Pharmacare Holdings. It trades about -0.03 of its total potential returns per unit of risk. Aspen Pharmacare Holdings is currently generating about 0.02 per unit of volatility. If you would invest  1,720,000  in Aspen Pharmacare Holdings on December 24, 2024 and sell it today you would earn a total of  27,200  from holding Aspen Pharmacare Holdings or generate 1.58% return on investment over 90 days.

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

General Motors  vs.  Aspen Pharmacare Holdings

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.

Aspen Pharmacare Holdings

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Pharmacare Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Aspen Pharmacare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GM and Aspen Pharmacare

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

The idea behind General Motors and Aspen Pharmacare Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.