Correlation Between GE HealthCare and Medical Cannabis

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

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

Diversification Opportunities for GE HealthCare and Medical Cannabis

0.45

Correlation Coefficient

GE HealthCare  Medical Cannabis

Very weak diversification

The 3 months correlation between GEHC and Medical is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding GE HealthCare Technologies and Medical Cannabis Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Cannabis Pay and GE HealthCare 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 GE HealthCare Technologies are associated (or correlated) with Medical Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Cannabis Pay has no effect on the direction of GE HealthCare i.e., GE HealthCare and Medical Cannabis go up and down completely randomly.

Pair Corralation between GE HealthCare and Medical Cannabis

Given the investment horizon of 90 days GE HealthCare Technologies is expected to generate 0.14 times more return on investment than Medical Cannabis. However, GE HealthCare Technologies is 7.3 times less risky than Medical Cannabis. It trades about -0.1 of its potential returns per unit of risk. Medical Cannabis Pay is currently generating about -0.1 per unit of risk. If you would invest  9,088  in GE HealthCare Technologies on February 27, 2024 and sell it today you would lose (1,103) from holding GE HealthCare Technologies or give up 12.14% of portfolio value over 90 days.

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

GE HealthCare Technologies  vs.  Medical Cannabis Pay

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 unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Medical Cannabis Pay

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medical Cannabis Pay has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GE HealthCare and Medical Cannabis

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

The idea behind GE HealthCare Technologies and Medical Cannabis Pay 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.