Correlation Between GM and Supernova Energy

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

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

Diversification Opportunities for GM and Supernova Energy

0.56

Correlation Coefficient

GM  Supernova Energy

Very weak diversification

The 3 months correlation between GM and Supernova is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Supernova Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supernova 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 Supernova Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supernova Energy has no effect on the direction of GM i.e., GM and Supernova Energy go up and down completely randomly.

Pair Corralation between GM and Supernova Energy

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.21 times more return on investment than Supernova Energy. However, General Motors is 4.87 times less risky than Supernova Energy. It trades about 0.05 of its potential returns per unit of risk. Supernova Energy is currently generating about -0.04 per unit of risk. If you would invest  3,924  in General Motors on December 5, 2024 and sell it today you would earn a total of  814.00  from holding General Motors or generate 20.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.8%
Values	Daily Returns

General Motors  vs.  Supernova Energy

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.

Supernova Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Supernova Energy 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 very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with GM and Supernova Energy

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

The idea behind General Motors and Supernova 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.