Correlation Between GM and Rigetti Computing

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

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

Diversification Opportunities for GM and Rigetti Computing

0.75

Correlation Coefficient

GM  Rigetti Computing

Poor diversification

The 3 months correlation between GM and Rigetti is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Rigetti Computing Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rigetti Computing 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 Rigetti Computing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rigetti Computing has no effect on the direction of GM i.e., GM and Rigetti Computing go up and down completely randomly.

Pair Corralation between GM and Rigetti Computing

Allowing for the 90-day total investment horizon GM is expected to generate 11.51 times less return on investment than Rigetti Computing. But when comparing it to its historical volatility, General Motors is 6.38 times less risky than Rigetti Computing. It trades about 0.06 of its potential returns per unit of risk. Rigetti Computing Warrants is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7.70  in Rigetti Computing Warrants on August 31, 2024 and sell it today you would earn a total of  89.30  from holding Rigetti Computing Warrants or generate 1159.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.58%
Values	Daily Returns

General Motors  vs.  Rigetti Computing Warrants

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

Rigetti Computing

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rigetti Computing Warrants are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Rigetti Computing showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Rigetti Computing

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

The idea behind General Motors and Rigetti Computing Warrants 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 Global Correlations module to find global opportunities by holding instruments from different markets.