Correlation Between GM and Kakao Games
Can any of the company-specific risk be diversified away by investing in both GM and Kakao Games 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 Kakao Games into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Kakao Games Corp, you can compare the effects of market volatilities on GM and Kakao Games 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 Kakao Games. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Kakao Games.
Diversification Opportunities for GM and Kakao Games
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Kakao is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kakao Games Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kakao Games Corp 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 Kakao Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kakao Games Corp has no effect on the direction of GM i.e., GM and Kakao Games go up and down completely randomly.
Pair Corralation between GM and Kakao Games
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.11 times more return on investment than Kakao Games. However, GM is 1.11 times more volatile than Kakao Games Corp. It trades about 0.07 of its potential returns per unit of risk. Kakao Games Corp is currently generating about 0.04 per unit of risk. If you would invest 5,273 in General Motors on August 29, 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Kakao Games Corp
Performance |
| Timeline |
| General Motors |
| Kakao Games Corp |
GM and Kakao Games Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Kakao Games
The main advantage of trading using opposite GM and Kakao Games positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Kakao Games 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 Kakao Games will offset losses from the drop in Kakao Games' long position.The idea behind General Motors and Kakao Games Corp 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.| Kakao Games vs. Sungmoon Electronics Co | Kakao Games vs. Sunny Electronics Corp | Kakao Games vs. Cuckoo Electronics Co | Kakao Games vs. Jin Air 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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