Correlation Between GM and Kaulin Mfg

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

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

Diversification Opportunities for GM and Kaulin Mfg

0.61

Correlation Coefficient

GM  Kaulin Mfg

Poor diversification

The 3 months correlation between GM and Kaulin is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kaulin Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaulin Mfg 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 Kaulin Mfg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaulin Mfg has no effect on the direction of GM i.e., GM and Kaulin Mfg go up and down completely randomly.

Pair Corralation between GM and Kaulin Mfg

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.34 times more return on investment than Kaulin Mfg. However, GM is 1.34 times more volatile than Kaulin Mfg. It trades about 0.04 of its potential returns per unit of risk. Kaulin Mfg is currently generating about -0.12 per unit of risk. If you would invest  5,034  in General Motors on October 20, 2024 and sell it today you would earn a total of  63.00  from holding General Motors or generate 1.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.91%
Values	Daily Returns

General Motors  vs.  Kaulin Mfg

General Motors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Kaulin Mfg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaulin Mfg has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with GM and Kaulin Mfg

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

The idea behind General Motors and Kaulin Mfg 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.