Correlation Between GM and KNH Enterprise

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

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

Diversification Opportunities for GM and KNH Enterprise

-0.66

Correlation Coefficient

GM  KNH Enterprise

Excellent diversification

The 3 months correlation between GM and KNH is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and KNH Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNH Enterprise 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 KNH Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNH Enterprise has no effect on the direction of GM i.e., GM and KNH Enterprise go up and down completely randomly.

Pair Corralation between GM and KNH Enterprise

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the KNH Enterprise. In addition to that, GM is 1.96 times more volatile than KNH Enterprise Co. It trades about -0.15 of its total potential returns per unit of risk. KNH Enterprise Co is currently generating about -0.24 per unit of volatility. If you would invest  1,830  in KNH Enterprise Co on September 15, 2024 and sell it today you would lose (125.00) from holding KNH Enterprise Co or give up 6.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  KNH Enterprise Co

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.

KNH Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KNH Enterprise Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with GM and KNH Enterprise

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

The idea behind General Motors and KNH Enterprise Co 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.