Correlation Between GM and Nuscale Power
Can any of the company-specific risk be diversified away by investing in both GM and Nuscale Power 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 Nuscale Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Nuscale Power Corp, you can compare the effects of market volatilities on GM and Nuscale Power 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 Nuscale Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Nuscale Power.
Diversification Opportunities for GM and Nuscale Power
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Nuscale is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nuscale Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuscale Power 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 Nuscale Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuscale Power Corp has no effect on the direction of GM i.e., GM and Nuscale Power go up and down completely randomly.
Pair Corralation between GM and Nuscale Power
Allowing for the 90-day total investment horizon GM is expected to generate 4.78 times less return on investment than Nuscale Power. But when comparing it to its historical volatility, General Motors is 2.61 times less risky than Nuscale Power. It trades about 0.12 of its potential returns per unit of risk. Nuscale Power Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,080 in Nuscale Power Corp on August 31, 2024 and sell it today you would earn a total of 726.00 from holding Nuscale Power Corp or generate 34.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Nuscale Power Corp
Performance |
| Timeline |
| General Motors |
| Nuscale Power Corp |
GM and Nuscale Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Nuscale Power
The main advantage of trading using opposite GM and Nuscale Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Nuscale Power 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 Nuscale Power will offset losses from the drop in Nuscale Power's long position.The idea behind General Motors and Nuscale Power 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.| Nuscale Power vs. Cummins | Nuscale Power vs. Chart Industries | Nuscale Power vs. GE Aerospace | Nuscale Power vs. Nel ASA |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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