Correlation Between GM and Kwong Fong
Can any of the company-specific risk be diversified away by investing in both GM and Kwong Fong 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 Kwong Fong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Kwong Fong Industries, you can compare the effects of market volatilities on GM and Kwong Fong 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 Kwong Fong. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Kwong Fong.
Diversification Opportunities for GM and Kwong Fong
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Kwong is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kwong Fong Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kwong Fong Industries 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 Kwong Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kwong Fong Industries has no effect on the direction of GM i.e., GM and Kwong Fong go up and down completely randomly.
Pair Corralation between GM and Kwong Fong
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.44 times more return on investment than Kwong Fong. However, GM is 1.44 times more volatile than Kwong Fong Industries. It trades about 0.32 of its potential returns per unit of risk. Kwong Fong Industries 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 747.00 from holding General Motors or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Kwong Fong Industries
Performance |
| Timeline |
| General Motors |
| Kwong Fong Industries |
GM and Kwong Fong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Kwong Fong
The main advantage of trading using opposite GM and Kwong Fong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Kwong Fong 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 Kwong Fong will offset losses from the drop in Kwong Fong's long position.The idea behind General Motors and Kwong Fong Industries 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.| Kwong Fong vs. Taiwan Semiconductor Manufacturing | Kwong Fong vs. Hon Hai Precision | Kwong Fong vs. MediaTek | Kwong Fong vs. Chunghwa Telecom 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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