Correlation Between GM and Xos Equity

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

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

Diversification Opportunities for GM and Xos Equity

-0.72

Correlation Coefficient

GM  Xos Equity

Pay attention - limited upside

The 3 months correlation between GM and Xos is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Xos Equity Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xos Equity Warrants 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 Xos Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xos Equity Warrants has no effect on the direction of GM i.e., GM and Xos Equity go up and down completely randomly.

Pair Corralation between GM and Xos Equity

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.16 times more return on investment than Xos Equity. However, General Motors is 6.31 times less risky than Xos Equity. It trades about 0.09 of its potential returns per unit of risk. Xos Equity Warrants is currently generating about -0.1 per unit of risk. If you would invest  4,602  in General Motors on September 12, 2024 and sell it today you would earn a total of  602.00  from holding General Motors or generate 13.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	87.5%
Values	Daily Returns

General Motors  vs.  Xos Equity 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.

Xos Equity Warrants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xos Equity Warrants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with GM and Xos Equity

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

The idea behind General Motors and Xos Equity 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.