Correlation Between GM and Invesco QQQ

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Can any of the company-specific risk be diversified away by investing in both GM and Invesco QQQ 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 QQQ 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 QQQ Trust, you can compare the effects of market volatilities on GM and Invesco QQQ 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 QQQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Invesco QQQ.

Diversification Opportunities for GM and Invesco QQQ

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between GM and Invesco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Invesco QQQ Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco QQQ Trust 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 QQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco QQQ Trust has no effect on the direction of GM i.e., GM and Invesco QQQ go up and down completely randomly.

Pair Corralation between GM and Invesco QQQ

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.47 times more return on investment than Invesco QQQ. However, GM is 1.47 times more volatile than Invesco QQQ Trust. It trades about 0.14 of its potential returns per unit of risk. Invesco QQQ Trust is currently generating about 0.13 per unit of risk. If you would invest  5,292  in General Motors on August 24, 2024 and sell it today you would earn a total of  276.00  from holding General Motors or generate 5.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Invesco QQQ Trust

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.
Invesco QQQ Trust 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco QQQ Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Invesco QQQ may actually be approaching a critical reversion point that can send shares even higher in December 2024.

GM and Invesco QQQ Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Invesco QQQ

The main advantage of trading using opposite GM and Invesco QQQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Invesco QQQ 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 QQQ will offset losses from the drop in Invesco QQQ's long position.
The idea behind General Motors and Invesco QQQ Trust 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.
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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