Correlation Between GM and Invesco Main
Can any of the company-specific risk be diversified away by investing in both GM and Invesco Main 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 Main 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 Main Street, you can compare the effects of market volatilities on GM and Invesco Main 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 Main. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Invesco Main.
Diversification Opportunities for GM and Invesco Main
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Invesco is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Invesco Main Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Main Street 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 Main. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Main Street has no effect on the direction of GM i.e., GM and Invesco Main go up and down completely randomly.
Pair Corralation between GM and Invesco Main
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.67 times more return on investment than Invesco Main. However, GM is 1.67 times more volatile than Invesco Main Street. It trades about 0.12 of its potential returns per unit of risk. Invesco Main Street is currently generating about 0.08 per unit of risk. If you would invest 2,815 in General Motors on September 15, 2024 and sell it today you would earn a total of 2,438 from holding General Motors or generate 86.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Invesco Main Street
Performance |
| Timeline |
| General Motors |
| Invesco Main Street |
GM and Invesco Main Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Invesco Main
The main advantage of trading using opposite GM and Invesco Main positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Invesco Main 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 Main will offset losses from the drop in Invesco Main's long position.The idea behind General Motors and Invesco Main Street 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 Main vs. Dreyfus Natural Resources | Invesco Main vs. Fidelity Advisor Energy | Invesco Main vs. Adams Natural Resources | Invesco Main vs. Gamco Natural Resources |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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