Correlation Between GM and Kings Town
Can any of the company-specific risk be diversified away by investing in both GM and Kings Town 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 Kings Town into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Kings Town Bank, you can compare the effects of market volatilities on GM and Kings Town 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 Kings Town. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Kings Town.
Diversification Opportunities for GM and Kings Town
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Kings is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kings Town Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kings Town Bank 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 Kings Town. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kings Town Bank has no effect on the direction of GM i.e., GM and Kings Town go up and down completely randomly.
Pair Corralation between GM and Kings Town
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.75 times more return on investment than Kings Town. However, GM is 1.75 times more volatile than Kings Town Bank. It trades about 0.17 of its potential returns per unit of risk. Kings Town Bank is currently generating about -0.05 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Kings Town Bank
Performance |
| Timeline |
| General Motors |
| Kings Town Bank |
GM and Kings Town Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Kings Town
The main advantage of trading using opposite GM and Kings Town positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Kings Town 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 Kings Town will offset losses from the drop in Kings Town's long position.The idea behind General Motors and Kings Town Bank 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.| Kings Town vs. Taichung Commercial Bank | Kings Town vs. Far Eastern International | Kings Town vs. Taiwan Business Bank | Kings Town vs. Sinopac Financial Holdings |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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