Correlation Between GM and Celularity

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

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

Diversification Opportunities for GM and Celularity

0.61

Correlation Coefficient

GM  Celularity

Poor diversification

The 3 months correlation between GM and Celularity is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Celularity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celularity 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 Celularity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celularity has no effect on the direction of GM i.e., GM and Celularity go up and down completely randomly.

Pair Corralation between GM and Celularity

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Celularity. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 2.98 times less risky than Celularity. The stock trades about -0.06 of its potential returns per unit of risk. The Celularity is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  205.00  in Celularity on December 28, 2024 and sell it today you would lose (17.00) from holding Celularity or give up 8.29% of portfolio value over 90 days.

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

General Motors  vs.  Celularity

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Celularity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Celularity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Celularity may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and Celularity

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

The idea behind General Motors and Celularity 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.