Correlation Between GM and Invesco Short
Can any of the company-specific risk be diversified away by investing in both GM and Invesco Short 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 Short 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 Short Duration, you can compare the effects of market volatilities on GM and Invesco Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Invesco Short.
Diversification Opportunities for GM and Invesco Short
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Invesco is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Invesco Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Short Duration 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Short Duration has no effect on the direction of GM i.e., GM and Invesco Short go up and down completely randomly.
Pair Corralation between GM and Invesco Short
Allowing for the 90-day total investment horizon General Motors is expected to generate 4.47 times more return on investment than Invesco Short. However, GM is 4.47 times more volatile than Invesco Short Duration. It trades about 0.05 of its potential returns per unit of risk. Invesco Short Duration is currently generating about 0.0 per unit of risk. If you would invest 3,749 in General Motors on August 29, 2024 and sell it today you would earn a total of 1,801 from holding General Motors or generate 48.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Invesco Short Duration
Performance |
| Timeline |
| General Motors |
| Invesco Short Duration |
GM and Invesco Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Invesco Short
The main advantage of trading using opposite GM and Invesco Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Invesco Short 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 Short will offset losses from the drop in Invesco Short's long position.The idea behind General Motors and Invesco Short Duration 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 Short vs. iShares 5 10 Year | Invesco Short vs. iShares 0 5 Year | Invesco Short vs. SPDR Barclays Short | Invesco Short vs. iShares Core Total |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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