Correlation Between GM and Kforce
Can any of the company-specific risk be diversified away by investing in both GM and Kforce 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 Kforce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Kforce Inc, you can compare the effects of market volatilities on GM and Kforce 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 Kforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Kforce.
Diversification Opportunities for GM and Kforce
Very weak diversification
The 3 months correlation between GM and Kforce is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Kforce Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kforce Inc 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 Kforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kforce Inc has no effect on the direction of GM i.e., GM and Kforce go up and down completely randomly.
Pair Corralation between GM and Kforce
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Kforce. In addition to that, GM is 1.81 times more volatile than Kforce Inc. It trades about -0.23 of its total potential returns per unit of risk. Kforce Inc is currently generating about 0.0 per unit of volatility. If you would invest 5,364 in Kforce Inc on September 23, 2024 and sell it today you would lose (14.00) from holding Kforce Inc or give up 0.26% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.45% |
Values | Daily Returns |
General Motors vs. Kforce Inc
Performance |
Timeline |
General Motors |
Kforce Inc |
GM and Kforce Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Kforce
The main advantage of trading using opposite GM and Kforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Kforce 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 Kforce will offset losses from the drop in Kforce's long position.The idea behind General Motors and Kforce Inc 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.Kforce vs. Aedas Homes SA | Kforce vs. Autohome ADR | Kforce vs. INTERSHOP Communications Aktiengesellschaft | Kforce vs. Iridium Communications |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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