Correlation Between GM and KraneShares MSCI

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Can any of the company-specific risk be diversified away by investing in both GM and KraneShares MSCI 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 KraneShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and KraneShares MSCI All, you can compare the effects of market volatilities on GM and KraneShares MSCI 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 KraneShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and KraneShares MSCI.

Diversification Opportunities for GM and KraneShares MSCI

0.04
  Correlation Coefficient

Significant diversification

The 3 months correlation between GM and KraneShares is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and KraneShares MSCI All in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares MSCI All 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 KraneShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares MSCI All has no effect on the direction of GM i.e., GM and KraneShares MSCI go up and down completely randomly.

Pair Corralation between GM and KraneShares MSCI

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.31 times more return on investment than KraneShares MSCI. However, GM is 1.31 times more volatile than KraneShares MSCI All. It trades about 0.14 of its potential returns per unit of risk. KraneShares MSCI All is currently generating about -0.1 per unit of risk. If you would invest  5,180  in General Motors on September 3, 2024 and sell it today you would earn a total of  379.00  from holding General Motors or generate 7.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  KraneShares MSCI All

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.
KraneShares MSCI All 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI All are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, KraneShares MSCI disclosed solid returns over the last few months and may actually be approaching a breakup point.

GM and KraneShares MSCI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and KraneShares MSCI

The main advantage of trading using opposite GM and KraneShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, KraneShares MSCI 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 KraneShares MSCI will offset losses from the drop in KraneShares MSCI's long position.
The idea behind General Motors and KraneShares MSCI All 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.
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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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