Correlation Between CVR Energy and General Motors

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

By analyzing existing cross correlation between CVR Energy and General Motors Co, you can compare the effects of market volatilities on CVR Energy and General Motors 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 CVR Energy with a short position of General Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVR Energy and General Motors.

Diversification Opportunities for CVR Energy and General Motors

-0.67

Correlation Coefficient

CVR Energy  General Motors

Excellent diversification

The 3 months correlation between CVR and General is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy and General Motors Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and CVR Energy 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 CVR Energy are associated (or correlated) with General Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of CVR Energy i.e., CVR Energy and General Motors go up and down completely randomly.

Pair Corralation between CVR Energy and General Motors

Assuming the 90 days trading horizon CVR Energy is expected to under-perform the General Motors. In addition to that, CVR Energy is 1.49 times more volatile than General Motors Co. It trades about -0.02 of its total potential returns per unit of risk. General Motors Co is currently generating about 0.04 per unit of volatility. If you would invest  4,042  in General Motors Co on September 26, 2024 and sell it today you would earn a total of  1,228  from holding General Motors Co or generate 30.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	87.76%
Values	Daily Returns

CVR Energy  vs.  General Motors Co

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

General Motors

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, General Motors unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVR Energy and General Motors

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

The idea behind CVR Energy and General Motors Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.