Correlation Between GM and Kempower Oyj

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

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

Diversification Opportunities for GM and Kempower Oyj

-0.79

Correlation Coefficient

GM  Kempower Oyj

Pay attention - limited upside

The 3 months correlation between GM and Kempower is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kempower Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kempower Oyj 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 Kempower Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kempower Oyj has no effect on the direction of GM i.e., GM and Kempower Oyj go up and down completely randomly.

Pair Corralation between GM and Kempower Oyj

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.94 times more return on investment than Kempower Oyj. However, General Motors is 1.06 times less risky than Kempower Oyj. It trades about 0.09 of its potential returns per unit of risk. Kempower Oyj is currently generating about -0.05 per unit of risk. If you would invest  4,620  in General Motors on September 13, 2024 and sell it today you would earn a total of  610.00  from holding General Motors or generate 13.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

General Motors  vs.  Kempower Oyj

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

Kempower Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kempower Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with GM and Kempower Oyj

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

The idea behind General Motors and Kempower Oyj 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.