Correlation Between GM and Mobileye Global

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

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

Diversification Opportunities for GM and Mobileye Global

0.83

Correlation Coefficient

GM  Mobileye Global

Very poor diversification

The 3 months correlation between GM and Mobileye is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mobileye Global Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mobileye Global Class 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 Mobileye Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mobileye Global Class has no effect on the direction of GM i.e., GM and Mobileye Global go up and down completely randomly.

Pair Corralation between GM and Mobileye Global

Allowing for the 90-day total investment horizon GM is expected to generate 4.68 times less return on investment than Mobileye Global. But when comparing it to its historical volatility, General Motors is 1.52 times less risky than Mobileye Global. It trades about 0.07 of its potential returns per unit of risk. Mobileye Global Class is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,457  in Mobileye Global Class on September 5, 2024 and sell it today you would earn a total of  297.00  from holding Mobileye Global Class or generate 20.38% return on investment over 90 days.

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

General Motors  vs.  Mobileye Global Class

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Mobileye Global Class

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mobileye Global Class are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, Mobileye Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Mobileye Global

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

The idea behind General Motors and Mobileye Global Class 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.