Correlation Between GM and Koninklijke KPN

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

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

Diversification Opportunities for GM and Koninklijke KPN

-0.18

Correlation Coefficient

GM  Koninklijke KPN

Good diversification

The 3 months correlation between GM and Koninklijke is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Koninklijke KPN NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke KPN NV 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 Koninklijke KPN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke KPN NV has no effect on the direction of GM i.e., GM and Koninklijke KPN go up and down completely randomly.

Pair Corralation between GM and Koninklijke KPN

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Koninklijke KPN. In addition to that, GM is 2.63 times more volatile than Koninklijke KPN NV. It trades about -0.06 of its total potential returns per unit of risk. Koninklijke KPN NV is currently generating about 0.17 per unit of volatility. If you would invest  350.00  in Koninklijke KPN NV on December 29, 2024 and sell it today you would earn a total of  41.00  from holding Koninklijke KPN NV or generate 11.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

General Motors  vs.  Koninklijke KPN NV

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.

Koninklijke KPN NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke KPN NV are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Koninklijke KPN may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and Koninklijke KPN

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

The idea behind General Motors and Koninklijke KPN NV 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.