Correlation Between GM and Henry Schein

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

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

Diversification Opportunities for GM and Henry Schein

-0.41

Correlation Coefficient

GM  Henry Schein

Very good diversification

The 3 months correlation between GM and Henry is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Henry Schein in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henry Schein 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 Henry Schein. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henry Schein has no effect on the direction of GM i.e., GM and Henry Schein go up and down completely randomly.

Pair Corralation between GM and Henry Schein

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.45 times more return on investment than Henry Schein. However, GM is 1.45 times more volatile than Henry Schein. It trades about -0.01 of its potential returns per unit of risk. Henry Schein is currently generating about -0.01 per unit of risk. If you would invest  5,404  in General Motors on December 26, 2024 and sell it today you would lose (145.00) from holding General Motors or give up 2.68% of portfolio value over 90 days.

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

General Motors  vs.  Henry Schein

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.

Henry Schein

Risk-Adjusted Performance

Very Weak

Over the last 90 days Henry Schein has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Henry Schein is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GM and Henry Schein

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

The idea behind General Motors and Henry Schein 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.