Correlation Between GM and Jagsonpal Pharmaceuticals

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

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

Diversification Opportunities for GM and Jagsonpal Pharmaceuticals

0.67

Correlation Coefficient

GM  Jagsonpal Pharmaceuticals

Poor diversification

The 3 months correlation between GM and Jagsonpal is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Jagsonpal Pharmaceuticals Limi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jagsonpal Pharmaceuticals 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 Jagsonpal Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jagsonpal Pharmaceuticals has no effect on the direction of GM i.e., GM and Jagsonpal Pharmaceuticals go up and down completely randomly.

Pair Corralation between GM and Jagsonpal Pharmaceuticals

Allowing for the 90-day total investment horizon GM is expected to generate 12.4 times less return on investment than Jagsonpal Pharmaceuticals. But when comparing it to its historical volatility, General Motors is 1.92 times less risky than Jagsonpal Pharmaceuticals. It trades about 0.03 of its potential returns per unit of risk. Jagsonpal Pharmaceuticals Limited is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  46,950  in Jagsonpal Pharmaceuticals Limited on September 26, 2024 and sell it today you would earn a total of  16,715  from holding Jagsonpal Pharmaceuticals Limited or generate 35.6% return on investment over 90 days.

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

General Motors  vs.  Jagsonpal Pharmaceuticals Limi

General Motors

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 9 (%) 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.

Jagsonpal Pharmaceuticals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jagsonpal Pharmaceuticals Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Jagsonpal Pharmaceuticals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Jagsonpal Pharmaceuticals

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

The idea behind General Motors and Jagsonpal Pharmaceuticals Limited 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.