Correlation Between GM and Invesco Dynamic
Can any of the company-specific risk be diversified away by investing in both GM and Invesco Dynamic 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 Dynamic 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 Dynamic Leisure, you can compare the effects of market volatilities on GM and Invesco Dynamic 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 Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Invesco Dynamic.
Diversification Opportunities for GM and Invesco Dynamic
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Invesco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Invesco Dynamic Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Leisure 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 Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Leisure has no effect on the direction of GM i.e., GM and Invesco Dynamic go up and down completely randomly.
Pair Corralation between GM and Invesco Dynamic
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.08 times more return on investment than Invesco Dynamic. However, GM is 2.08 times more volatile than Invesco Dynamic Leisure. It trades about 0.08 of its potential returns per unit of risk. Invesco Dynamic Leisure is currently generating about 0.15 per unit of risk. If you would invest 4,551 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,008 from holding General Motors or generate 22.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Invesco Dynamic Leisure
Performance |
| Timeline |
| General Motors |
| Invesco Dynamic Leisure |
GM and Invesco Dynamic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Invesco Dynamic
The main advantage of trading using opposite GM and Invesco Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Invesco Dynamic 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 Dynamic will offset losses from the drop in Invesco Dynamic's long position.The idea behind General Motors and Invesco Dynamic Leisure 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 Dynamic vs. Amplify ETF Trust | Invesco Dynamic vs. Invesco Dynamic Food | Invesco Dynamic vs. Invesco Dynamic Building |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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