Correlation Between GM and Theta Network

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

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

Diversification Opportunities for GM and Theta Network

0.85

Correlation Coefficient

GM  Theta Network

Very poor diversification

The 3 months correlation between GM and Theta is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Theta Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Theta Network 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 Theta Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Theta Network has no effect on the direction of GM i.e., GM and Theta Network go up and down completely randomly.

Pair Corralation between GM and Theta Network

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.33 times more return on investment than Theta Network. However, General Motors is 3.02 times less risky than Theta Network. It trades about -0.07 of its potential returns per unit of risk. Theta Network is currently generating about -0.19 per unit of risk. If you would invest  5,492  in General Motors on December 1, 2024 and sell it today you would lose (579.00) from holding General Motors or give up 10.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.75%
Values	Daily Returns

General Motors  vs.  Theta Network

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.

Theta Network

Risk-Adjusted Performance

Very Weak

Over the last 90 days Theta Network has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Theta Network shareholders.

Pair Trading with GM and Theta Network

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

The idea behind General Motors and Theta Network 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.