Correlation Between GM and K9 Gold
Can any of the company-specific risk be diversified away by investing in both GM and K9 Gold 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 K9 Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and K9 Gold Corp, you can compare the effects of market volatilities on GM and K9 Gold 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 K9 Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and K9 Gold.
Diversification Opportunities for GM and K9 Gold
Very weak diversification
The 3 months correlation between GM and WDFCF is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and K9 Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K9 Gold 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 K9 Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K9 Gold Corp has no effect on the direction of GM i.e., GM and K9 Gold go up and down completely randomly.
Pair Corralation between GM and K9 Gold
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the K9 Gold. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 2.87 times less risky than K9 Gold. The stock trades about -0.1 of its potential returns per unit of risk. The K9 Gold Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6.63 in K9 Gold Corp on October 26, 2024 and sell it today you would earn a total of 0.17 from holding K9 Gold Corp or generate 2.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. K9 Gold Corp
Performance |
| Timeline |
| General Motors |
| K9 Gold Corp |
GM and K9 Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and K9 Gold
The main advantage of trading using opposite GM and K9 Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, K9 Gold 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 K9 Gold will offset losses from the drop in K9 Gold's long position.The idea behind General Motors and K9 Gold 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.| K9 Gold vs. Aurwest Resources | K9 Gold vs. Benton Resources | K9 Gold vs. Pan Global Resources | K9 Gold vs. Red Moon Resources |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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