Correlation Between GM and Kinnevik Investment

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

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

Diversification Opportunities for GM and Kinnevik Investment

-0.5

Correlation Coefficient

GM  Kinnevik Investment

Very good diversification

The 3 months correlation between GM and Kinnevik is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment 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 Kinnevik Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinnevik Investment has no effect on the direction of GM i.e., GM and Kinnevik Investment go up and down completely randomly.

Pair Corralation between GM and Kinnevik Investment

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Kinnevik Investment. In addition to that, GM is 1.22 times more volatile than Kinnevik Investment AB. It trades about -0.06 of its total potential returns per unit of risk. Kinnevik Investment AB is currently generating about 0.03 per unit of volatility. If you would invest  7,432  in Kinnevik Investment AB on December 29, 2024 and sell it today you would earn a total of  155.00  from holding Kinnevik Investment AB or generate 2.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

General Motors  vs.  Kinnevik Investment AB

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 latest abnormal performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Kinnevik Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kinnevik Investment AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kinnevik Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Kinnevik Investment

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

The idea behind General Motors and Kinnevik Investment AB 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 Global Correlations module to find global opportunities by holding instruments from different markets.