Correlation Between GM and Blade Air

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

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

Diversification Opportunities for GM and Blade Air

0.13

Correlation Coefficient

GM  Blade Air

Average diversification

The 3 months correlation between GM and Blade is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Blade Air Mobility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blade Air Mobility 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 Blade Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blade Air Mobility has no effect on the direction of GM i.e., GM and Blade Air go up and down completely randomly.

Pair Corralation between GM and Blade Air

Allowing for the 90-day total investment horizon GM is expected to generate 1.56 times less return on investment than Blade Air. But when comparing it to its historical volatility, General Motors is 4.5 times less risky than Blade Air. It trades about 0.1 of its potential returns per unit of risk. Blade Air Mobility is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  318.00  in Blade Air Mobility on February 28, 2024 and sell it today you would earn a total of  3.00  from holding Blade Air Mobility or generate 0.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

General Motors  vs.  Blade Air Mobility

General Motors

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Blade Air Mobility

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blade Air Mobility are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, Blade Air exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Blade Air

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

The idea behind General Motors and Blade Air Mobility 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.