Correlation Between GM and Kentucky First
Can any of the company-specific risk be diversified away by investing in both GM and Kentucky First 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 Kentucky First into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Kentucky First Federal, you can compare the effects of market volatilities on GM and Kentucky First 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 Kentucky First. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Kentucky First.
Diversification Opportunities for GM and Kentucky First
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Kentucky is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kentucky First Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kentucky First Federal 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 Kentucky First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kentucky First Federal has no effect on the direction of GM i.e., GM and Kentucky First go up and down completely randomly.
Pair Corralation between GM and Kentucky First
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.7 times more return on investment than Kentucky First. However, General Motors is 1.43 times less risky than Kentucky First. It trades about 0.1 of its potential returns per unit of risk. Kentucky First Federal is currently generating about 0.03 per unit of risk. If you would invest 4,602 in General Motors on September 12, 2024 and sell it today you would earn a total of 672.00 from holding General Motors or generate 14.6% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
General Motors vs. Kentucky First Federal
Performance |
Timeline |
General Motors |
Kentucky First Federal |
GM and Kentucky First Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Kentucky First
The main advantage of trading using opposite GM and Kentucky First positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Kentucky First 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 Kentucky First will offset losses from the drop in Kentucky First's long position.The idea behind General Motors and Kentucky First Federal 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.Kentucky First vs. Home Federal Bancorp | Kentucky First vs. Lake Shore Bancorp | Kentucky First vs. Commerzbank AG | Kentucky First vs. Investar Holding Corp |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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