Correlation Between GM and KG Eco

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

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

Diversification Opportunities for GM and KG Eco

-0.55

Correlation Coefficient

GM  KG Eco

Excellent diversification

The 3 months correlation between GM and 151860 is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and KG Eco Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KG Eco Technology 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 KG Eco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KG Eco Technology has no effect on the direction of GM i.e., GM and KG Eco go up and down completely randomly.

Pair Corralation between GM and KG Eco

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the KG Eco. In addition to that, GM is 1.3 times more volatile than KG Eco Technology. It trades about -0.06 of its total potential returns per unit of risk. KG Eco Technology is currently generating about 0.07 per unit of volatility. If you would invest  474,000  in KG Eco Technology on December 28, 2024 and sell it today you would earn a total of  37,000  from holding KG Eco Technology or generate 7.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

General Motors  vs.  KG Eco Technology

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

KG Eco Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KG Eco Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KG Eco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and KG Eco

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

The idea behind General Motors and KG Eco Technology 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.