Correlation Between GM and Nine Energy
Can any of the company-specific risk be diversified away by investing in both GM and Nine Energy 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 Nine Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Nine Energy Service, you can compare the effects of market volatilities on GM and Nine Energy 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 Nine Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Nine Energy.
Diversification Opportunities for GM and Nine Energy
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and Nine is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nine Energy Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nine Energy Service 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 Nine Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nine Energy Service has no effect on the direction of GM i.e., GM and Nine Energy go up and down completely randomly.
Pair Corralation between GM and Nine Energy
Allowing for the 90-day total investment horizon GM is expected to generate 4.84 times less return on investment than Nine Energy. But when comparing it to its historical volatility, General Motors is 4.76 times less risky than Nine Energy. It trades about 0.32 of its potential returns per unit of risk. Nine Energy Service is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 85.00 in Nine Energy Service on August 28, 2024 and sell it today you would earn a total of 65.00 from holding Nine Energy Service or generate 76.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Nine Energy Service
Performance |
| Timeline |
| General Motors |
| Nine Energy Service |
GM and Nine Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Nine Energy
The main advantage of trading using opposite GM and Nine Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Nine Energy 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 Nine Energy will offset losses from the drop in Nine Energy's long position.The idea behind General Motors and Nine Energy Service 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.| Nine Energy vs. Liberty Oilfield Services | Nine Energy vs. ProFrac Holding Corp | Nine Energy vs. Helix Energy Solutions | Nine Energy vs. Newpark Resources |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |