Correlation Between GM and Santhera Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both GM and Santhera 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 Santhera 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 Santhera Pharmaceuticals Holding, you can compare the effects of market volatilities on GM and Santhera 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 Santhera Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Santhera Pharmaceuticals.

Diversification Opportunities for GM and Santhera Pharmaceuticals

-0.53

Correlation Coefficient

GM  Santhera Pharmaceuticals

Excellent diversification

The 3 months correlation between GM and Santhera is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Santhera Pharmaceuticals Holdi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santhera 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 Santhera Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santhera Pharmaceuticals has no effect on the direction of GM i.e., GM and Santhera Pharmaceuticals go up and down completely randomly.

Pair Corralation between GM and Santhera Pharmaceuticals

Allowing for the 90-day total investment horizon GM is expected to generate 3.11 times less return on investment than Santhera Pharmaceuticals. But when comparing it to its historical volatility, General Motors is 1.92 times less risky than Santhera Pharmaceuticals. It trades about 0.04 of its potential returns per unit of risk. Santhera Pharmaceuticals Holding is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  640.00  in Santhera Pharmaceuticals Holding on December 4, 2024 and sell it today you would earn a total of  936.00  from holding Santhera Pharmaceuticals Holding or generate 146.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

General Motors  vs.  Santhera Pharmaceuticals Holdi

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Santhera Pharmaceuticals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Santhera Pharmaceuticals Holding are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Santhera Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Santhera Pharmaceuticals

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

The idea behind General Motors and Santhera Pharmaceuticals Holding 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.