Correlation Between DexCom and GE HealthCare

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

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

Diversification Opportunities for DexCom and GE HealthCare

-0.51

Correlation Coefficient

DexCom  GE HealthCare

Excellent diversification

The 3 months correlation between DexCom and GEHC is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding DexCom Inc 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 DexCom 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 DexCom Inc 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 DexCom i.e., DexCom and GE HealthCare go up and down completely randomly.

Pair Corralation between DexCom and GE HealthCare

Given the investment horizon of 90 days DexCom Inc is expected to under-perform the GE HealthCare. In addition to that, DexCom is 3.3 times more volatile than GE HealthCare Technologies. It trades about -0.08 of its total potential returns per unit of risk. GE HealthCare Technologies is currently generating about 0.02 per unit of volatility. If you would invest  8,169  in GE HealthCare Technologies on August 16, 2024 and sell it today you would earn a total of  123.00  from holding GE HealthCare Technologies or generate 1.51% return on investment over 90 days.

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

DexCom Inc  vs.  GE HealthCare Technologies

DexCom Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 DexCom and GE HealthCare

The main advantage of trading using opposite DexCom and GE HealthCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DexCom 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 DexCom Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.