Correlation Between Xpeng and GM

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

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

Diversification Opportunities for Xpeng and GM

-0.57

Correlation Coefficient

Xpeng  GM

Excellent diversification

The 3 months correlation between Xpeng and GM is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Xpeng Inc and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Xpeng 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 Xpeng Inc are associated (or correlated) with GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Xpeng i.e., Xpeng and GM go up and down completely randomly.

Pair Corralation between Xpeng and GM

Given the investment horizon of 90 days Xpeng Inc is expected to generate 1.97 times more return on investment than GM. However, Xpeng is 1.97 times more volatile than General Motors. It trades about 0.18 of its potential returns per unit of risk. General Motors is currently generating about -0.01 per unit of risk. If you would invest  1,326  in Xpeng Inc on December 26, 2024 and sell it today you would earn a total of  775.00  from holding Xpeng Inc or generate 58.45% return on investment over 90 days.

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

Xpeng Inc  vs.  General Motors

Xpeng Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xpeng Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Xpeng showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Xpeng and GM

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

The idea behind Xpeng Inc and General Motors 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.