Correlation Between Stellantis and GM

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

By analyzing existing cross correlation between Stellantis NV and General Motors, you can compare the effects of market volatilities on Stellantis 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 Stellantis with a short position of GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellantis and GM.

Diversification Opportunities for Stellantis and GM

-0.5

Correlation Coefficient

Stellantis  GM

Very good diversification

The 3 months correlation between Stellantis and GM is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Stellantis NV and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Stellantis 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 Stellantis NV 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 Stellantis i.e., Stellantis and GM go up and down completely randomly.

Pair Corralation between Stellantis and GM

Given the investment horizon of 90 days Stellantis NV is expected to under-perform the GM. But the stock apears to be less risky and, when comparing its historical volatility, Stellantis NV is 1.13 times less risky than GM. The stock trades about -0.15 of its potential returns per unit of risk. The General Motors is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,180  in General Motors on September 5, 2024 and sell it today you would earn a total of  186.00  from holding General Motors or generate 3.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Stellantis NV  vs.  General Motors

Stellantis NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stellantis NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) 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.

Pair Trading with Stellantis and GM

The main advantage of trading using opposite Stellantis and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellantis 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.

The idea behind Stellantis NV and General Motors 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.