Correlation Between GM and Alpha Tau

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

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

Diversification Opportunities for GM and Alpha Tau

-0.05

Correlation Coefficient

GM  Alpha Tau

Good diversification

The 3 months correlation between GM and Alpha is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Alpha Tau Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Tau 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 Alpha Tau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Tau Medical has no effect on the direction of GM i.e., GM and Alpha Tau go up and down completely randomly.

Pair Corralation between GM and Alpha Tau

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Alpha Tau. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.78 times less risky than Alpha Tau. The stock trades about -0.07 of its potential returns per unit of risk. The Alpha Tau Medical is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  302.00  in Alpha Tau Medical on December 1, 2024 and sell it today you would earn a total of  0.00  from holding Alpha Tau Medical or generate 0.0% 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.  Alpha Tau Medical

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 weak 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.

Alpha Tau Medical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Tau Medical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alpha Tau is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and Alpha Tau

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

The idea behind General Motors and Alpha Tau 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.