Correlation Between GM and Uber Technologies

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Can any of the company-specific risk be diversified away by investing in both GM and Uber Technologies 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 Uber Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Uber Technologies, you can compare the effects of market volatilities on GM and Uber Technologies 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 Uber Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Uber Technologies.

Diversification Opportunities for GM and Uber Technologies

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between GM and Uber Technologies is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of GM i.e., GM and Uber Technologies go up and down completely randomly.

Pair Corralation between GM and Uber Technologies

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.76 times more return on investment than Uber Technologies. However, General Motors is 1.32 times less risky than Uber Technologies. It trades about 0.03 of its potential returns per unit of risk. Uber Technologies is currently generating about 0.02 per unit of risk. If you would invest  2,922  in General Motors on May 11, 2022 and sell it today you would earn a total of  740.00  from holding General Motors or generate 25.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Uber Technologies

 Performance (%) 
       Timeline  
General Motors 
GM Performance
0 of 100
Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady primary indicators, GM is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

GM Price Channel

Uber Technologies 
Uber Technologies Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Uber Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Uber Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Uber Technologies Price Channel

GM and Uber Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Uber Technologies

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

Uber Technologies

Pair trading matchups for Uber Technologies

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 Bond Directory module to find actively traded corporate debentures issued by US companies.

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