Correlation Between GM and Kojamo

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

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

Diversification Opportunities for GM and Kojamo

-0.68

Correlation Coefficient

GM  Kojamo

Excellent diversification

The 3 months correlation between GM and Kojamo is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kojamo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kojamo 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 Kojamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kojamo has no effect on the direction of GM i.e., GM and Kojamo go up and down completely randomly.

Pair Corralation between GM and Kojamo

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.02 times more return on investment than Kojamo. However, GM is 1.02 times more volatile than Kojamo. It trades about -0.05 of its potential returns per unit of risk. Kojamo is currently generating about -0.09 per unit of risk. If you would invest  5,271  in General Motors on October 8, 2024 and sell it today you would lose (94.00) from holding General Motors or give up 1.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	84.21%
Values	Daily Returns

General Motors  vs.  Kojamo

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.

Kojamo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kojamo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking indicators, Kojamo 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 Kojamo

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

The idea behind General Motors and Kojamo 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.