Correlation Between GM and Kakao Games

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

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

Diversification Opportunities for GM and Kakao Games

0.05

Correlation Coefficient

GM  Kakao Games

Significant diversification

The 3 months correlation between GM and Kakao is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kakao Games Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kakao Games Corp 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 Kakao Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kakao Games Corp has no effect on the direction of GM i.e., GM and Kakao Games go up and down completely randomly.

Pair Corralation between GM and Kakao Games

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.67 times more return on investment than Kakao Games. However, General Motors is 1.5 times less risky than Kakao Games. It trades about -0.11 of its potential returns per unit of risk. Kakao Games Corp is currently generating about -0.1 per unit of risk. If you would invest  5,324  in General Motors on December 4, 2024 and sell it today you would lose (802.00) from holding General Motors or give up 15.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

General Motors  vs.  Kakao Games Corp

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Kakao Games Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kakao Games Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with GM and Kakao Games

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

The idea behind General Motors and Kakao Games Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.