Correlation Between GM and Navient

Can any of the company-specific risk be diversified away by investing in both GM and Navient 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 Navient into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Navient 675 percent, you can compare the effects of market volatilities on GM and Navient 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 Navient. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Navient.

Diversification Opportunities for GM and Navient

-0.49

Correlation Coefficient

GM  Navient

Very good diversification

The 3 months correlation between GM and Navient is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Navient 675 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navient 675 percent 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 Navient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navient 675 percent has no effect on the direction of GM i.e., GM and Navient go up and down completely randomly.

Pair Corralation between GM and Navient

Allowing for the 90-day total investment horizon General Motors is expected to generate 3.37 times more return on investment than Navient. However, GM is 3.37 times more volatile than Navient 675 percent. It trades about 0.05 of its potential returns per unit of risk. Navient 675 percent is currently generating about 0.0 per unit of risk. If you would invest  3,762  in General Motors on September 3, 2024 and sell it today you would earn a total of  1,797  from holding General Motors or generate 47.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.84%
Values	Daily Returns

General Motors  vs.  Navient 675 percent

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Navient 675 percent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navient 675 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Navient is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Navient

The main advantage of trading using opposite GM and Navient positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Navient 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 Navient will offset losses from the drop in Navient's long position.

The idea behind General Motors and Navient 675 percent 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.