Correlation Between GM and Kore Potash
Can any of the company-specific risk be diversified away by investing in both GM and Kore Potash 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 Kore Potash into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Kore Potash Plc, you can compare the effects of market volatilities on GM and Kore Potash 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 Kore Potash. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Kore Potash.
Diversification Opportunities for GM and Kore Potash
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Kore is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kore Potash Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kore Potash Plc 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 Kore Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kore Potash Plc has no effect on the direction of GM i.e., GM and Kore Potash go up and down completely randomly.
Pair Corralation between GM and Kore Potash
Allowing for the 90-day total investment horizon GM is expected to generate 8.68 times less return on investment than Kore Potash. But when comparing it to its historical volatility, General Motors is 3.51 times less risky than Kore Potash. It trades about 0.03 of its potential returns per unit of risk. Kore Potash Plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,800 in Kore Potash Plc on November 26, 2024 and sell it today you would earn a total of 4,400 from holding Kore Potash Plc or generate 244.44% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 99.19% |
Values | Daily Returns |
General Motors vs. Kore Potash Plc
Performance |
Timeline |
General Motors |
Kore Potash Plc |
GM and Kore Potash Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Kore Potash
The main advantage of trading using opposite GM and Kore Potash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Kore Potash 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 Kore Potash will offset losses from the drop in Kore Potash's long position.The idea behind General Motors and Kore Potash Plc 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.Kore Potash vs. Glencore PLC | ||
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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