Correlation Between Klabin SA and General Motors

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

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

Diversification Opportunities for Klabin SA and General Motors

0.42

Correlation Coefficient

Klabin SA  General Motors

Very weak diversification

The 3 months correlation between Klabin and General is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Klabin SA and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Klabin SA 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 Klabin SA are associated (or correlated) with General Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Klabin SA i.e., Klabin SA and General Motors go up and down completely randomly.

Pair Corralation between Klabin SA and General Motors

Assuming the 90 days trading horizon Klabin SA is expected to generate 0.7 times more return on investment than General Motors. However, Klabin SA is 1.43 times less risky than General Motors. It trades about -0.1 of its potential returns per unit of risk. General Motors is currently generating about -0.07 per unit of risk. If you would invest  456.00  in Klabin SA on December 1, 2024 and sell it today you would lose (52.00) from holding Klabin SA or give up 11.4% of portfolio value over 90 days.

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

Klabin SA  vs.  General Motors

Klabin SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Klabin SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Klabin SA and General Motors

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

The idea behind Klabin SA and General Motors 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.