Correlation Between GM and BrightSpring Health

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

Diversification Opportunities for GM and BrightSpring Health

-0.12

Correlation Coefficient

GM  BrightSpring Health

Good diversification

The 3 months correlation between GM and BrightSpring is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and BrightSpring Health Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightSpring 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 BrightSpring Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrightSpring Health has no effect on the direction of GM i.e., GM and BrightSpring Health go up and down completely randomly.

Pair Corralation between GM and BrightSpring Health

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the BrightSpring Health. In addition to that, GM is 1.01 times more volatile than BrightSpring Health Services,. It trades about -0.06 of its total potential returns per unit of risk. BrightSpring Health Services, is currently generating about 0.05 per unit of volatility. If you would invest  6,195  in BrightSpring Health Services, on December 29, 2024 and sell it today you would earn a total of  358.00  from holding BrightSpring Health Services, or generate 5.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  BrightSpring Health Services,

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.

BrightSpring Health

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BrightSpring Health Services, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, BrightSpring Health may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and BrightSpring Health

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

The idea behind General Motors and BrightSpring Health Services, 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.