Correlation Between GM and XTL Biopharmaceutica

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

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

Diversification Opportunities for GM and XTL Biopharmaceutica

-0.63

Correlation Coefficient

GM  XTL Biopharmaceutica

Excellent diversification

The 3 months correlation between GM and XTL is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and XTL Biopharmaceuticals Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XTL Biopharmaceuticals 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 XTL Biopharmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XTL Biopharmaceuticals has no effect on the direction of GM i.e., GM and XTL Biopharmaceutica go up and down completely randomly.

Pair Corralation between GM and XTL Biopharmaceutica

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.3 times more return on investment than XTL Biopharmaceutica. However, General Motors is 3.32 times less risky than XTL Biopharmaceutica. It trades about 0.13 of its potential returns per unit of risk. XTL Biopharmaceuticals Ltd is currently generating about 0.01 per unit of risk. If you would invest  4,474  in General Motors on September 28, 2024 and sell it today you would earn a total of  877.00  from holding General Motors or generate 19.6% return on investment over 90 days.

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

General Motors  vs.  XTL Biopharmaceuticals Ltd

General Motors

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 10 (%) 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.

XTL Biopharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XTL Biopharmaceuticals Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, XTL Biopharmaceutica is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and XTL Biopharmaceutica

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

The idea behind General Motors and XTL Biopharmaceuticals Ltd 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.