Correlation Between GM and HOB Biotech

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

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

Diversification Opportunities for GM and HOB Biotech

0.88

Correlation Coefficient

GM  HOB Biotech

Very poor diversification

The 3 months correlation between GM and HOB is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and HOB Biotech Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOB Biotech Group 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 HOB Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOB Biotech Group has no effect on the direction of GM i.e., GM and HOB Biotech go up and down completely randomly.

Pair Corralation between GM and HOB Biotech

Allowing for the 90-day total investment horizon GM is expected to generate 13.09 times less return on investment than HOB Biotech. But when comparing it to its historical volatility, General Motors is 3.4 times less risky than HOB Biotech. It trades about 0.1 of its potential returns per unit of risk. HOB Biotech Group is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  2,261  in HOB Biotech Group on September 13, 2024 and sell it today you would earn a total of  8,749  from holding HOB Biotech Group or generate 386.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.48%
Values	Daily Returns

General Motors  vs.  HOB Biotech Group

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

HOB Biotech Group

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in HOB Biotech Group are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HOB Biotech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and HOB Biotech

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

The idea behind General Motors and HOB Biotech Group 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 CEOs Directory module to screen CEOs from public companies around the world.