Correlation Between GM and NexGel Warrant

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

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

Diversification Opportunities for GM and NexGel Warrant

0.31

Correlation Coefficient

GM  NexGel Warrant

Weak diversification

The 3 months correlation between GM and NexGel is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and NexGel Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGel Warrant 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 NexGel Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGel Warrant has no effect on the direction of GM i.e., GM and NexGel Warrant go up and down completely randomly.

Pair Corralation between GM and NexGel Warrant

Allowing for the 90-day total investment horizon GM is expected to generate 83.9 times less return on investment than NexGel Warrant. But when comparing it to its historical volatility, General Motors is 44.77 times less risky than NexGel Warrant. It trades about 0.05 of its potential returns per unit of risk. NexGel Warrant is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  39.00  in NexGel Warrant on October 3, 2024 and sell it today you would earn a total of  36.00  from holding NexGel Warrant or generate 92.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	70.05%
Values	Daily Returns

General Motors  vs.  NexGel Warrant

General Motors

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 10 (%) 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.

NexGel Warrant

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NexGel Warrant are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, NexGel Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and NexGel Warrant

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

The idea behind General Motors and NexGel Warrant 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.