Correlation Between GM and Tiziana Life

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

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

Diversification Opportunities for GM and Tiziana Life

0.18

Correlation Coefficient

GM  Tiziana Life

Average diversification

The 3 months correlation between GM and Tiziana is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Tiziana Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiziana Life Sciences 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 Tiziana Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tiziana Life Sciences has no effect on the direction of GM i.e., GM and Tiziana Life go up and down completely randomly.

Pair Corralation between GM and Tiziana Life

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.32 times more return on investment than Tiziana Life. However, General Motors is 3.09 times less risky than Tiziana Life. It trades about -0.02 of its potential returns per unit of risk. Tiziana Life Sciences is currently generating about -0.04 per unit of risk. If you would invest  5,280  in General Motors on October 23, 2024 and sell it today you would lose (183.00) from holding General Motors or give up 3.47% of portfolio value over 90 days.

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

General Motors  vs.  Tiziana Life Sciences

General Motors

Risk-Adjusted Performance

0 of 100

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 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.

Tiziana Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tiziana Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with GM and Tiziana Life

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

The idea behind General Motors and Tiziana Life Sciences 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.