Correlation Between GM and XSpring Capital

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

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

Diversification Opportunities for GM and XSpring Capital

0.19

Correlation Coefficient

GM  XSpring Capital

Average diversification

The 3 months correlation between GM and XSpring is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and XSpring Capital Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XSpring Capital Public 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 XSpring Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XSpring Capital Public has no effect on the direction of GM i.e., GM and XSpring Capital go up and down completely randomly.

Pair Corralation between GM and XSpring Capital

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.77 times more return on investment than XSpring Capital. However, General Motors is 1.31 times less risky than XSpring Capital. It trades about -0.09 of its potential returns per unit of risk. XSpring Capital Public is currently generating about -0.31 per unit of risk. If you would invest  5,004  in General Motors on November 29, 2024 and sell it today you would lose (158.00) from holding General Motors or give up 3.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  XSpring Capital Public

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

XSpring Capital Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days XSpring Capital Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with GM and XSpring Capital

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

The idea behind General Motors and XSpring Capital Public 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.