Correlation Between Viatris and GE HealthCare

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

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

Diversification Opportunities for Viatris and GE HealthCare

-0.71

Correlation Coefficient

Viatris  GE HealthCare

Pay attention - limited upside

The 3 months correlation between Viatris and GEHC is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Viatris and GE HealthCare Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE HealthCare Techno and Viatris 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 Viatris are associated (or correlated) with GE HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE HealthCare Techno has no effect on the direction of Viatris i.e., Viatris and GE HealthCare go up and down completely randomly.

Pair Corralation between Viatris and GE HealthCare

Given the investment horizon of 90 days Viatris is expected to generate 1.75 times more return on investment than GE HealthCare. However, Viatris is 1.75 times more volatile than GE HealthCare Technologies. It trades about 0.09 of its potential returns per unit of risk. GE HealthCare Technologies is currently generating about -0.06 per unit of risk. If you would invest  1,178  in Viatris on September 4, 2024 and sell it today you would earn a total of  142.00  from holding Viatris or generate 12.05% return on investment over 90 days.

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

Viatris  vs.  GE HealthCare Technologies

Viatris

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Viatris are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Viatris unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Viatris and GE HealthCare

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

The idea behind Viatris and GE HealthCare Technologies 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.