Correlation Between CM Hospitalar and GP Investments

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

By analyzing existing cross correlation between CM Hospitalar SA and GP Investments, you can compare the effects of market volatilities on CM Hospitalar and GP Investments 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 CM Hospitalar with a short position of GP Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of CM Hospitalar and GP Investments.

Diversification Opportunities for CM Hospitalar and GP Investments

-0.17

Correlation Coefficient

CM Hospitalar  GP Investments

Good diversification

The 3 months correlation between VVEO3 and GPIV33 is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding CM Hospitalar SA and GP Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GP Investments and CM Hospitalar 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 CM Hospitalar SA are associated (or correlated) with GP Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GP Investments has no effect on the direction of CM Hospitalar i.e., CM Hospitalar and GP Investments go up and down completely randomly.

Pair Corralation between CM Hospitalar and GP Investments

Assuming the 90 days trading horizon CM Hospitalar SA is expected to under-perform the GP Investments. In addition to that, CM Hospitalar is 1.05 times more volatile than GP Investments. It trades about -0.04 of its total potential returns per unit of risk. GP Investments is currently generating about 0.03 per unit of volatility. If you would invest  408.00  in GP Investments on September 15, 2024 and sell it today you would earn a total of  6.00  from holding GP Investments or generate 1.47% return on investment over 90 days.

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

CM Hospitalar SA  vs.  GP Investments

CM Hospitalar SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CM Hospitalar SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

GP Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GP Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, GP Investments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CM Hospitalar and GP Investments

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

The idea behind CM Hospitalar SA and GP Investments 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .