Correlation Between GM and Korea Steel
Can any of the company-specific risk be diversified away by investing in both GM and Korea Steel 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 Korea Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Korea Steel Co, you can compare the effects of market volatilities on GM and Korea Steel 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 Korea Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Korea Steel.
Diversification Opportunities for GM and Korea Steel
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Korea is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Korea Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Steel 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 Korea Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Steel has no effect on the direction of GM i.e., GM and Korea Steel go up and down completely randomly.
Pair Corralation between GM and Korea Steel
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.65 times more return on investment than Korea Steel. However, GM is 1.65 times more volatile than Korea Steel Co. It trades about 0.07 of its potential returns per unit of risk. Korea Steel Co is currently generating about -0.18 per unit of risk. If you would invest 5,273 in General Motors on August 28, 2024 and sell it today you would earn a total of 206.00 from holding General Motors or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Korea Steel Co
Performance |
| Timeline |
| General Motors |
| Korea Steel |
GM and Korea Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Korea Steel
The main advantage of trading using opposite GM and Korea Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Korea Steel 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 Korea Steel will offset losses from the drop in Korea Steel's long position.The idea behind General Motors and Korea Steel Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |