Correlation Between GM and Kimberly Clark

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

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

Diversification Opportunities for GM and Kimberly Clark

0.08

Correlation Coefficient

GM  Kimberly Clark

Significant diversification

The 3 months correlation between GM and Kimberly is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kimberly Clark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark 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 Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark has no effect on the direction of GM i.e., GM and Kimberly Clark go up and down completely randomly.

Pair Corralation between GM and Kimberly Clark

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Kimberly Clark. In addition to that, GM is 1.99 times more volatile than Kimberly Clark. It trades about -0.13 of its total potential returns per unit of risk. Kimberly Clark is currently generating about 0.04 per unit of volatility. If you would invest  13,797  in Kimberly Clark on November 27, 2024 and sell it today you would earn a total of  333.50  from holding Kimberly Clark or generate 2.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Kimberly Clark

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 March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Kimberly Clark

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kimberly Clark are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Kimberly Clark is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Kimberly Clark

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

The idea behind General Motors and Kimberly Clark 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.