Correlation Between GM and AngioDynamics

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

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

Diversification Opportunities for GM and AngioDynamics

0.14

Correlation Coefficient

GM  AngioDynamics

Average diversification

The 3 months correlation between GM and AngioDynamics is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and AngioDynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AngioDynamics 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 AngioDynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AngioDynamics has no effect on the direction of GM i.e., GM and AngioDynamics go up and down completely randomly.

Pair Corralation between GM and AngioDynamics

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.57 times more return on investment than AngioDynamics. However, General Motors is 1.76 times less risky than AngioDynamics. It trades about 0.21 of its potential returns per unit of risk. AngioDynamics is currently generating about 0.06 per unit of risk. If you would invest  3,448  in General Motors on January 18, 2024 and sell it today you would earn a total of  798.00  from holding General Motors or generate 23.14% return on investment over 90 days.

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

General Motors  vs.  AngioDynamics

General Motors

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

AngioDynamics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AngioDynamics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, AngioDynamics may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with GM and AngioDynamics

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

The idea behind General Motors and AngioDynamics 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.