Correlation Between GM and Invesco Technology
Can any of the company-specific risk be diversified away by investing in both GM and Invesco Technology 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 Invesco Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Invesco Technology Fund, you can compare the effects of market volatilities on GM and Invesco Technology 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 Invesco Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Invesco Technology.
Diversification Opportunities for GM and Invesco Technology
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Invesco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Invesco Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Technology 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 Invesco Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Technology has no effect on the direction of GM i.e., GM and Invesco Technology go up and down completely randomly.
Pair Corralation between GM and Invesco Technology
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.4 times more return on investment than Invesco Technology. However, GM is 1.4 times more volatile than Invesco Technology Fund. It trades about 0.09 of its potential returns per unit of risk. Invesco Technology Fund is currently generating about 0.07 per unit of risk. If you would invest 4,044 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,515 from holding General Motors or generate 37.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.47% |
| Values | Daily Returns |
General Motors vs. Invesco Technology Fund
Performance |
| Timeline |
| General Motors |
| Invesco Technology |
GM and Invesco Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Invesco Technology
The main advantage of trading using opposite GM and Invesco Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Invesco Technology 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 Invesco Technology will offset losses from the drop in Invesco Technology's long position.The idea behind General Motors and Invesco Technology Fund 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.| Invesco Technology vs. Veea Inc | Invesco Technology vs. VHAI | Invesco Technology vs. VivoPower International PLC | Invesco Technology vs. WEBTOON Entertainment Common |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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