Correlation Between GM and KWESST MICRO

Can any of the company-specific risk be diversified away by investing in both GM and KWESST MICRO 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 KWESST MICRO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and KWESST MICRO SYSINC, you can compare the effects of market volatilities on GM and KWESST MICRO 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 KWESST MICRO. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and KWESST MICRO.

Diversification Opportunities for GM and KWESST MICRO

0.03

Correlation Coefficient

GM  KWESST MICRO

Significant diversification

The 3 months correlation between GM and KWESST is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and KWESST MICRO SYSINC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KWESST MICRO SYSINC 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 KWESST MICRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KWESST MICRO SYSINC has no effect on the direction of GM i.e., GM and KWESST MICRO go up and down completely randomly.

Pair Corralation between GM and KWESST MICRO

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the KWESST MICRO. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 2.51 times less risky than KWESST MICRO. The stock trades about -0.16 of its potential returns per unit of risk. The KWESST MICRO SYSINC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  57.00  in KWESST MICRO SYSINC on September 19, 2024 and sell it today you would lose (1.00) from holding KWESST MICRO SYSINC or give up 1.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  KWESST MICRO SYSINC

General Motors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KWESST MICRO SYSINC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KWESST MICRO SYSINC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KWESST MICRO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and KWESST MICRO

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

The idea behind General Motors and KWESST MICRO SYSINC 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.