Correlation Between GM and Iteos Therapeutics

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

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

Diversification Opportunities for GM and Iteos Therapeutics

-0.5

Correlation Coefficient

GM  Iteos Therapeutics

Very good diversification

The 3 months correlation between GM and Iteos is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Iteos Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iteos Therapeutics 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 Iteos Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iteos Therapeutics has no effect on the direction of GM i.e., GM and Iteos Therapeutics go up and down completely randomly.

Pair Corralation between GM and Iteos Therapeutics

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.08 times more return on investment than Iteos Therapeutics. However, GM is 1.08 times more volatile than Iteos Therapeutics. It trades about 0.12 of its potential returns per unit of risk. Iteos Therapeutics is currently generating about 0.0 per unit of risk. If you would invest  5,197  in General Motors on August 31, 2024 and sell it today you would earn a total of  353.00  from holding General Motors or generate 6.79% return on investment over 90 days.

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

General Motors  vs.  Iteos Therapeutics

General Motors

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Iteos Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iteos Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with GM and Iteos Therapeutics

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

The idea behind General Motors and Iteos Therapeutics 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.