Correlation Between GM and Neolife SA

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

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

Diversification Opportunities for GM and Neolife SA

0.0

Correlation Coefficient

GM  Neolife SA

Pay attention - limited upside

The 3 months correlation between GM and Neolife is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Neolife SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neolife SA 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 Neolife SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neolife SA has no effect on the direction of GM i.e., GM and Neolife SA go up and down completely randomly.

Pair Corralation between GM and Neolife SA

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Neolife SA. In addition to that, GM is 1.19 times more volatile than Neolife SA. It trades about -0.22 of its total potential returns per unit of risk. Neolife SA is currently generating about 0.27 per unit of volatility. If you would invest  5.62  in Neolife SA on September 26, 2024 and sell it today you would earn a total of  0.67  from holding Neolife SA or generate 11.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Neolife SA

General Motors

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 9 (%) 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.

Neolife SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Neolife SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Neolife SA is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GM and Neolife SA

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

The idea behind General Motors and Neolife SA 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.