Correlation Between GM and Nikola Corp
Can any of the company-specific risk be diversified away by investing in both GM and Nikola Corp 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 Nikola Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Nikola Corp, you can compare the effects of market volatilities on GM and Nikola Corp 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 Nikola Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Nikola Corp.
Diversification Opportunities for GM and Nikola Corp
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Nikola is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nikola Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nikola Corp 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 Nikola Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nikola Corp has no effect on the direction of GM i.e., GM and Nikola Corp go up and down completely randomly.
Pair Corralation between GM and Nikola Corp
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.22 times more return on investment than Nikola Corp. However, General Motors is 4.57 times less risky than Nikola Corp. It trades about 0.24 of its potential returns per unit of risk. Nikola Corp is currently generating about -0.32 per unit of risk. If you would invest 5,292 in General Motors on August 24, 2024 and sell it today you would earn a total of 561.00 from holding General Motors or generate 10.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. Nikola Corp
Performance |
| Timeline |
| General Motors |
| Nikola Corp |
GM and Nikola Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Nikola Corp
The main advantage of trading using opposite GM and Nikola Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Nikola Corp 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 Nikola Corp will offset losses from the drop in Nikola Corp's long position.The idea behind General Motors and Nikola Corp 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.| Nikola Corp vs. Lion Electric Corp | Nikola Corp vs. Xos Inc | Nikola Corp vs. Hydrofarm Holdings Group | Nikola Corp vs. Caterpillar |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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