Correlation Between GM and SIMCERE PHARMAC

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

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

Diversification Opportunities for GM and SIMCERE PHARMAC

0.07

Correlation Coefficient

GM  SIMCERE PHARMAC

Significant diversification

The 3 months correlation between GM and SIMCERE is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SIMCERE PHARMAC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMCERE PHARMAC GRP 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 SIMCERE PHARMAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMCERE PHARMAC GRP has no effect on the direction of GM i.e., GM and SIMCERE PHARMAC go up and down completely randomly.

Pair Corralation between GM and SIMCERE PHARMAC

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the SIMCERE PHARMAC. In addition to that, GM is 1.4 times more volatile than SIMCERE PHARMAC GRP. It trades about -0.12 of its total potential returns per unit of risk. SIMCERE PHARMAC GRP is currently generating about -0.15 per unit of volatility. If you would invest  85.00  in SIMCERE PHARMAC GRP on October 15, 2024 and sell it today you would lose (3.00) from holding SIMCERE PHARMAC GRP or give up 3.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	84.21%
Values	Daily Returns

General Motors  vs.  SIMCERE PHARMAC GRP

General Motors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

SIMCERE PHARMAC GRP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIMCERE PHARMAC GRP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SIMCERE PHARMAC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and SIMCERE PHARMAC

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

The idea behind General Motors and SIMCERE PHARMAC GRP 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.