Correlation Between GM and Celgene

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

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

Diversification Opportunities for GM and Celgene

0.0

Correlation Coefficient

GM  Celgene

Pay attention - limited upside

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

Pair Corralation between GM and Celgene

If you would invest (100.00) in Celgene on October 1, 2024 and sell it today you would earn a total of  100.00  from holding Celgene or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

General Motors  vs.  Celgene

General Motors

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 11 (%) 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.

Celgene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Celgene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Celgene is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GM and Celgene

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

The idea behind General Motors and Celgene 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..