Correlation Between GM and Kerry TJ

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

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

Diversification Opportunities for GM and Kerry TJ

0.2

Correlation Coefficient

GM  Kerry TJ

Modest diversification

The 3 months correlation between GM and Kerry is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kerry TJ Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kerry TJ Logistics 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 Kerry TJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kerry TJ Logistics has no effect on the direction of GM i.e., GM and Kerry TJ go up and down completely randomly.

Pair Corralation between GM and Kerry TJ

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.76 times more return on investment than Kerry TJ. However, GM is 1.76 times more volatile than Kerry TJ Logistics. It trades about 0.09 of its potential returns per unit of risk. Kerry TJ Logistics is currently generating about 0.01 per unit of risk. If you would invest  3,511  in General Motors on September 15, 2024 and sell it today you would earn a total of  1,742  from holding General Motors or generate 49.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.98%
Values	Daily Returns

General Motors  vs.  Kerry TJ Logistics

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.

Kerry TJ Logistics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kerry TJ Logistics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kerry TJ is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GM and Kerry TJ

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

The idea behind General Motors and Kerry TJ Logistics 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.