Correlation Between GM and Canoo
Can any of the company-specific risk be diversified away by investing in both GM and Canoo 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 Canoo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Canoo Inc, you can compare the effects of market volatilities on GM and Canoo 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 Canoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Canoo.
Diversification Opportunities for GM and Canoo
Pay attention - limited upside
The 3 months correlation between GM and Canoo is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Canoo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canoo Inc 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 Canoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canoo Inc has no effect on the direction of GM i.e., GM and Canoo go up and down completely randomly.
Pair Corralation between GM and Canoo
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.21 times more return on investment than Canoo. However, General Motors is 4.76 times less risky than Canoo. It trades about 0.12 of its potential returns per unit of risk. Canoo Inc is currently generating about -0.11 per unit of risk. If you would invest 2,815 in General Motors on September 14, 2024 and sell it today you would earn a total of 2,436 from holding General Motors or generate 86.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Canoo Inc
Performance |
| Timeline |
| General Motors |
| Canoo Inc |
GM and Canoo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Canoo
The main advantage of trading using opposite GM and Canoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Canoo 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 Canoo will offset losses from the drop in Canoo's long position.The idea behind General Motors and Canoo Inc 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.| Canoo vs. Lucid Group | Canoo vs. Rivian Automotive | Canoo vs. Polestar Automotive Holding | Canoo vs. Mullen Automotive |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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