Correlation Between GM and Kennedy Wilson

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

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

Diversification Opportunities for GM and Kennedy Wilson

0.46

Correlation Coefficient

GM  Kennedy Wilson

Very weak diversification

The 3 months correlation between GM and Kennedy is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kennedy Wilson Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kennedy Wilson Holdings 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 Kennedy Wilson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kennedy Wilson Holdings has no effect on the direction of GM i.e., GM and Kennedy Wilson go up and down completely randomly.

Pair Corralation between GM and Kennedy Wilson

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.35 times more return on investment than Kennedy Wilson. However, GM is 1.35 times more volatile than Kennedy Wilson Holdings. It trades about 0.1 of its potential returns per unit of risk. Kennedy Wilson Holdings is currently generating about 0.05 per unit of risk. If you would invest  4,829  in General Motors on September 2, 2024 and sell it today you would earn a total of  730.00  from holding General Motors or generate 15.12% 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.  Kennedy Wilson Holdings

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Kennedy Wilson Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kennedy Wilson Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kennedy Wilson is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GM and Kennedy Wilson

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

The idea behind General Motors and Kennedy Wilson Holdings 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.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .