Correlation Between GM and KTAM Gold

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Can any of the company-specific risk be diversified away by investing in both GM and KTAM Gold 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 KTAM Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and KTAM Gold ETF, you can compare the effects of market volatilities on GM and KTAM Gold 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 KTAM Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and KTAM Gold.

Diversification Opportunities for GM and KTAM Gold

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between GM and KTAM is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and KTAM Gold ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KTAM Gold ETF 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 KTAM Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KTAM Gold ETF has no effect on the direction of GM i.e., GM and KTAM Gold go up and down completely randomly.

Pair Corralation between GM and KTAM Gold

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the KTAM Gold. In addition to that, GM is 4.03 times more volatile than KTAM Gold ETF. It trades about -0.11 of its total potential returns per unit of risk. KTAM Gold ETF is currently generating about -0.09 per unit of volatility. If you would invest  367.00  in KTAM Gold ETF on September 22, 2024 and sell it today you would lose (5.00) from holding KTAM Gold ETF or give up 1.36% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  KTAM Gold ETF

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.
KTAM Gold ETF 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in KTAM Gold ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, KTAM Gold is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

GM and KTAM Gold Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and KTAM Gold

The main advantage of trading using opposite GM and KTAM Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, KTAM Gold 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 KTAM Gold will offset losses from the drop in KTAM Gold's long position.
The idea behind General Motors and KTAM Gold ETF 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.
Check out your portfolio center.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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