Correlation Between GE HealthCare and Viatris

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

By analyzing existing cross correlation between GE HealthCare Technologies and Viatris, you can compare the effects of market volatilities on GE HealthCare and Viatris 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 GE HealthCare with a short position of Viatris. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE HealthCare and Viatris.

Diversification Opportunities for GE HealthCare and Viatris

-0.79

Correlation Coefficient

GE HealthCare  Viatris

Pay attention - limited upside

The 3 months correlation between GEHC and Viatris is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding GE HealthCare Technologies and Viatris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viatris and GE HealthCare 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 GE HealthCare Technologies are associated (or correlated) with Viatris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viatris has no effect on the direction of GE HealthCare i.e., GE HealthCare and Viatris go up and down completely randomly.

Pair Corralation between GE HealthCare and Viatris

Given the investment horizon of 90 days GE HealthCare Technologies is expected to under-perform the Viatris. But the stock apears to be less risky and, when comparing its historical volatility, GE HealthCare Technologies is 1.75 times less risky than Viatris. The stock trades about -0.07 of its potential returns per unit of risk. The Viatris is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,164  in Viatris on September 12, 2024 and sell it today you would earn a total of  87.00  from holding Viatris or generate 7.47% return on investment over 90 days.

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

GE HealthCare Technologies  vs.  Viatris

GE HealthCare Techno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GE HealthCare Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, GE HealthCare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Viatris

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viatris are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Viatris may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GE HealthCare and Viatris

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

The idea behind GE HealthCare Technologies and Viatris 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.