Correlation Between GM and Kilroy Realty
Can any of the company-specific risk be diversified away by investing in both GM and Kilroy Realty 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 Kilroy Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Kilroy Realty Corp, you can compare the effects of market volatilities on GM and Kilroy Realty 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 Kilroy Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Kilroy Realty.
Diversification Opportunities for GM and Kilroy Realty
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Kilroy is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kilroy Realty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kilroy Realty 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 Kilroy Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kilroy Realty Corp has no effect on the direction of GM i.e., GM and Kilroy Realty go up and down completely randomly.
Pair Corralation between GM and Kilroy Realty
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.49 times more return on investment than Kilroy Realty. However, GM is 1.49 times more volatile than Kilroy Realty Corp. It trades about 0.14 of its potential returns per unit of risk. Kilroy Realty Corp is currently generating about 0.18 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 Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
General Motors vs. Kilroy Realty Corp
Performance |
| Timeline |
| General Motors |
| Kilroy Realty Corp |
GM and Kilroy Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Kilroy Realty
The main advantage of trading using opposite GM and Kilroy Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Kilroy Realty 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 Kilroy Realty will offset losses from the drop in Kilroy Realty's long position.The idea behind General Motors and Kilroy Realty 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.| Kilroy Realty vs. SL Green Realty | Kilroy Realty vs. Superior Plus Corp | Kilroy Realty vs. NMI Holdings | Kilroy Realty vs. Origin Agritech |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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