Correlation Between GM and Talos Energy

Can any of the company-specific risk be diversified away by investing in both GM and Talos 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 Talos 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 Talos Energy, you can compare the effects of market volatilities on GM and Talos 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 Talos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Talos Energy.

Diversification Opportunities for GM and Talos Energy

0.56

Correlation Coefficient

GM  Talos Energy

Very weak diversification

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

Pair Corralation between GM and Talos Energy

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Talos Energy. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.06 times less risky than Talos Energy. The stock trades about -0.02 of its potential returns per unit of risk. The Talos Energy is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  918.00  in Talos Energy on December 25, 2024 and sell it today you would earn a total of  2.00  from holding Talos Energy or generate 0.22% return on investment over 90 days.

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

General Motors  vs.  Talos 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 very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Talos Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Talos Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Talos Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GM and Talos Energy

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

The idea behind General Motors and Talos 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.