Correlation Between GM and Kopernik International
Can any of the company-specific risk be diversified away by investing in both GM and Kopernik International 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 Kopernik International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Kopernik International, you can compare the effects of market volatilities on GM and Kopernik International 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 Kopernik International. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Kopernik International.
Diversification Opportunities for GM and Kopernik International
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Kopernik is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kopernik International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kopernik International 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 Kopernik International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kopernik International has no effect on the direction of GM i.e., GM and Kopernik International go up and down completely randomly.
Pair Corralation between GM and Kopernik International
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.49 times more return on investment than Kopernik International. However, GM is 2.49 times more volatile than Kopernik International. It trades about 0.14 of its potential returns per unit of risk. Kopernik International is currently generating about -0.01 per unit of risk. If you would invest 3,135 in General Motors on August 26, 2024 and sell it today you would earn a total of 2,718 from holding General Motors or generate 86.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Kopernik International
Performance |
| Timeline |
| General Motors |
| Kopernik International |
GM and Kopernik International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Kopernik International
The main advantage of trading using opposite GM and Kopernik International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Kopernik International 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 Kopernik International will offset losses from the drop in Kopernik International's long position.The idea behind General Motors and Kopernik International 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.| Kopernik International vs. Western Asset Inflation | Kopernik International vs. Ab Bond Inflation | Kopernik International vs. Federated Hermes Inflation | Kopernik International vs. Atac Inflation Rotation |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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