Correlation Between GM and Joby Aviation

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

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

Diversification Opportunities for GM and Joby Aviation

0.39

Correlation Coefficient

GM  Joby Aviation

Weak diversification

The 3 months correlation between GM and Joby is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Joby Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joby Aviation 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 Joby Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joby Aviation has no effect on the direction of GM i.e., GM and Joby Aviation go up and down completely randomly.

Pair Corralation between GM and Joby Aviation

Allowing for the 90-day total investment horizon GM is expected to generate 5.99 times less return on investment than Joby Aviation. But when comparing it to its historical volatility, General Motors is 4.41 times less risky than Joby Aviation. It trades about 0.04 of its potential returns per unit of risk. Joby Aviation is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Joby Aviation on December 4, 2024 and sell it today you would earn a total of  72.00  from holding Joby Aviation or generate 135.85% return on investment over 90 days.

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

General Motors  vs.  Joby Aviation

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.

Joby Aviation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Joby Aviation 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with GM and Joby Aviation

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

The idea behind General Motors and Joby Aviation 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.