Correlation Between LiveWire and GM
Can any of the company-specific risk be diversified away by investing in both LiveWire 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 LiveWire and GM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LiveWire Group and General Motors, you can compare the effects of market volatilities on LiveWire 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 LiveWire with a short position of GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of LiveWire and GM.
Diversification Opportunities for LiveWire and GM
Modest diversification
The 3 months correlation between LiveWire and GM is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding LiveWire Group and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and LiveWire 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 LiveWire Group 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 LiveWire i.e., LiveWire and GM go up and down completely randomly.
Pair Corralation between LiveWire and GM
Given the investment horizon of 90 days LiveWire is expected to generate 1.77 times less return on investment than GM. In addition to that, LiveWire is 1.29 times more volatile than General Motors. It trades about 0.07 of its total potential returns per unit of risk. General Motors is currently generating about 0.16 per unit of volatility. If you would invest 5,096 in General Motors on September 2, 2024 and sell it today you would earn a total of 463.00 from holding General Motors or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LiveWire Group vs. General Motors
Performance |
| Timeline |
| LiveWire Group |
| General Motors |
LiveWire and GM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LiveWire and GM
The main advantage of trading using opposite LiveWire and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LiveWire 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.| LiveWire vs. Ford Motor | LiveWire vs. General Motors | LiveWire vs. Goodyear Tire Rubber | LiveWire vs. Li Auto |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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