Correlation Between GM and Solar Alliance

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

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

Diversification Opportunities for GM and Solar Alliance

-0.74

Correlation Coefficient

GM  Solar Alliance

Pay attention - limited upside

The 3 months correlation between GM and Solar is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Solar Alliance Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Alliance Energy 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 Solar Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Alliance Energy has no effect on the direction of GM i.e., GM and Solar Alliance go up and down completely randomly.

Pair Corralation between GM and Solar Alliance

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.31 times more return on investment than Solar Alliance. However, General Motors is 3.18 times less risky than Solar Alliance. It trades about 0.07 of its potential returns per unit of risk. Solar Alliance Energy is currently generating about -0.04 per unit of risk. If you would invest  4,741  in General Motors on September 17, 2024 and sell it today you would earn a total of  483.00  from holding General Motors or generate 10.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

General Motors  vs.  Solar Alliance Energy

General Motors

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Solar Alliance Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solar Alliance Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GM and Solar Alliance

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

The idea behind General Motors and Solar Alliance Energy 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..