Correlation Between GM and Healthcare Special

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

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

Diversification Opportunities for GM and Healthcare Special

-0.45

Correlation Coefficient

GM  Healthcare Special

Very good diversification

The 3 months correlation between GM and Healthcare is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Healthcare Special Opportuniti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Special 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 Healthcare Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Special has no effect on the direction of GM i.e., GM and Healthcare Special go up and down completely randomly.

Pair Corralation between GM and Healthcare Special

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Healthcare Special. In addition to that, GM is 1.66 times more volatile than Healthcare Special Opportunities. It trades about -0.07 of its total potential returns per unit of risk. Healthcare Special Opportunities is currently generating about 0.04 per unit of volatility. If you would invest  1,295  in Healthcare Special Opportunities on December 1, 2024 and sell it today you would earn a total of  36.00  from holding Healthcare Special Opportunities or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

General Motors  vs.  Healthcare Special Opportuniti

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.

Healthcare Special

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Special Opportunities are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Healthcare Special is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Healthcare Special

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

The idea behind General Motors and Healthcare Special Opportunities 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.