Correlation Between GM and Albireo Pharma

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

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

Diversification Opportunities for GM and Albireo Pharma

0.76

Correlation Coefficient

GM  Albireo Pharma

Poor diversification

The 3 months correlation between GM and Albireo is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Albireo Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albireo Pharma 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 Albireo Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albireo Pharma has no effect on the direction of GM i.e., GM and Albireo Pharma go up and down completely randomly.

Pair Corralation between GM and Albireo Pharma

If you would invest  4,355  in General Motors on January 25, 2024 and sell it today you would earn a total of  153.00  from holding General Motors or generate 3.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

General Motors  vs.  Albireo Pharma

General Motors

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 18 (%) 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.

Albireo Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Albireo Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Albireo Pharma is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GM and Albireo Pharma

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

The idea behind General Motors and Albireo Pharma 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..