Correlation Between GM and Ropharma Bras

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

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

Diversification Opportunities for GM and Ropharma Bras

-0.29

Correlation Coefficient

GM  Ropharma Bras

Very good diversification

The 3 months correlation between GM and Ropharma is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ropharma Bras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ropharma Bras 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 Ropharma Bras. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ropharma Bras has no effect on the direction of GM i.e., GM and Ropharma Bras go up and down completely randomly.

Pair Corralation between GM and Ropharma Bras

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Ropharma Bras. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 3.15 times less risky than Ropharma Bras. The stock trades about -0.07 of its potential returns per unit of risk. The Ropharma Bras is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Ropharma Bras on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Ropharma Bras or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Ropharma Bras

General Motors

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 8 (%) 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.

Ropharma Bras

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ropharma Bras are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Ropharma Bras is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GM and Ropharma Bras

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

The idea behind General Motors and Ropharma Bras 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.