Correlation Between GM and KPX Chemical
Can any of the company-specific risk be diversified away by investing in both GM and KPX Chemical 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 KPX Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and KPX Chemical, you can compare the effects of market volatilities on GM and KPX Chemical 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 KPX Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and KPX Chemical.
Diversification Opportunities for GM and KPX Chemical
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and KPX is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and KPX Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KPX Chemical 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 KPX Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KPX Chemical has no effect on the direction of GM i.e., GM and KPX Chemical go up and down completely randomly.
Pair Corralation between GM and KPX Chemical
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.04 times more return on investment than KPX Chemical. However, GM is 2.04 times more volatile than KPX Chemical. It trades about 0.05 of its potential returns per unit of risk. KPX Chemical is currently generating about -0.05 per unit of risk. If you would invest 4,718 in General Motors on September 13, 2024 and sell it today you would earn a total of 494.50 from holding General Motors or generate 10.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 96.8% |
| Values | Daily Returns |
General Motors vs. KPX Chemical
Performance |
| Timeline |
| General Motors |
| KPX Chemical |
GM and KPX Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and KPX Chemical
The main advantage of trading using opposite GM and KPX Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, KPX Chemical 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 KPX Chemical will offset losses from the drop in KPX Chemical's long position.The idea behind General Motors and KPX Chemical 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.| KPX Chemical vs. ITM Semiconductor Co | KPX Chemical vs. Dgb Financial | KPX Chemical vs. CJ Seafood Corp | KPX Chemical vs. Sewoon Medical Co |
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.
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