Correlation Between GM and Karsten SA

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

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

Diversification Opportunities for GM and Karsten SA

0.63

Correlation Coefficient

GM  Karsten SA

Poor diversification

The 3 months correlation between GM and Karsten is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Karsten SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karsten SA 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 Karsten SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karsten SA has no effect on the direction of GM i.e., GM and Karsten SA go up and down completely randomly.

Pair Corralation between GM and Karsten SA

If you would invest  2,189  in Karsten SA on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Karsten SA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Karsten SA

General Motors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) 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.

Karsten SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Karsten SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Karsten SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and Karsten SA

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

The idea behind General Motors and Karsten SA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.