Correlation Between GM and XP Infra
Can any of the company-specific risk be diversified away by investing in both GM and XP Infra 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 XP Infra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and XP Infra Fund, you can compare the effects of market volatilities on GM and XP Infra 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 XP Infra. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and XP Infra.
Diversification Opportunities for GM and XP Infra
Pay attention - limited upside
The 3 months correlation between GM and XPIE11 is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and XP Infra Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XP Infra Fund 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 XP Infra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XP Infra Fund has no effect on the direction of GM i.e., GM and XP Infra go up and down completely randomly.
Pair Corralation between GM and XP Infra
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.33 times more return on investment than XP Infra. However, GM is 2.33 times more volatile than XP Infra Fund. It trades about 0.08 of its potential returns per unit of risk. XP Infra Fund is currently generating about -0.01 per unit of risk. If you would invest 3,311 in General Motors on August 30, 2024 and sell it today you would earn a total of 2,239 from holding General Motors or generate 67.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.75% |
| Values | Daily Returns |
General Motors vs. XP Infra Fund
Performance |
| Timeline |
| General Motors |
| XP Infra Fund |
GM and XP Infra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and XP Infra
The main advantage of trading using opposite GM and XP Infra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, XP Infra 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 XP Infra will offset losses from the drop in XP Infra's long position.The idea behind General Motors and XP Infra 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.| XP Infra vs. Energisa SA | XP Infra vs. BTG Pactual Logstica | XP Infra vs. Plano Plano Desenvolvimento | XP Infra vs. Companhia Habitasul de |
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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