Correlation Between GM and Kee Tai
Can any of the company-specific risk be diversified away by investing in both GM and Kee Tai 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 Kee Tai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Kee Tai Properties, you can compare the effects of market volatilities on GM and Kee Tai 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 Kee Tai. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Kee Tai.
Diversification Opportunities for GM and Kee Tai
Weak diversification
The 3 months correlation between GM and Kee is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kee Tai Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kee Tai Properties 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 Kee Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kee Tai Properties has no effect on the direction of GM i.e., GM and Kee Tai go up and down completely randomly.
Pair Corralation between GM and Kee Tai
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Kee Tai. In addition to that, GM is 1.79 times more volatile than Kee Tai Properties. It trades about -0.04 of its total potential returns per unit of risk. Kee Tai Properties is currently generating about 0.34 per unit of volatility. If you would invest 1,395 in Kee Tai Properties on December 6, 2024 and sell it today you would earn a total of 150.00 from holding Kee Tai Properties or generate 10.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Kee Tai Properties
Performance |
| Timeline |
| General Motors |
| Kee Tai Properties |
GM and Kee Tai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Kee Tai
The main advantage of trading using opposite GM and Kee Tai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Kee Tai 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 Kee Tai will offset losses from the drop in Kee Tai's long position.The idea behind General Motors and Kee Tai Properties 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.| Kee Tai vs. Hung Sheng Construction | Kee Tai vs. Chainqui Construction Development | Kee Tai vs. BES Engineering Co | Kee Tai vs. Long Bon International |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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