Correlation Between GM and Brd Klee
Can any of the company-specific risk be diversified away by investing in both GM and Brd Klee 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 Brd Klee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Brd Klee AS, you can compare the effects of market volatilities on GM and Brd Klee 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 Brd Klee. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Brd Klee.
Diversification Opportunities for GM and Brd Klee
Very good diversification
The 3 months correlation between GM and Brd is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Brd Klee AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brd Klee AS 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 Brd Klee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brd Klee AS has no effect on the direction of GM i.e., GM and Brd Klee go up and down completely randomly.
Pair Corralation between GM and Brd Klee
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.64 times more return on investment than Brd Klee. However, General Motors is 1.57 times less risky than Brd Klee. It trades about 0.05 of its potential returns per unit of risk. Brd Klee AS is currently generating about 0.02 per unit of risk. If you would invest 3,179 in General Motors on January 25, 2024 and sell it today you would earn a total of 1,329 from holding General Motors or generate 41.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.56% |
| Values | Daily Returns |
General Motors vs. Brd Klee AS
Performance |
| Timeline |
| General Motors |
| Brd Klee AS |
GM and Brd Klee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Brd Klee
The main advantage of trading using opposite GM and Brd Klee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Brd Klee 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 Brd Klee will offset losses from the drop in Brd Klee's long position.The idea behind General Motors and Brd Klee AS 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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