Correlation Between GM and Invesco Emerging

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

Diversification Opportunities for GM and Invesco Emerging

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between GM and Invesco is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Invesco Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Emerging Markets 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 Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Emerging Markets has no effect on the direction of GM i.e., GM and Invesco Emerging go up and down completely randomly.

Pair Corralation between GM and Invesco Emerging

Allowing for the 90-day total investment horizon General Motors is expected to generate 4.95 times more return on investment than Invesco Emerging. However, GM is 4.95 times more volatile than Invesco Emerging Markets. It trades about 0.33 of its potential returns per unit of risk. Invesco Emerging Markets is currently generating about -0.05 per unit of risk. If you would invest  4,006  in General Motors on December 29, 2023 and sell it today you would earn a total of  453.00  from holding General Motors or generate 11.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Invesco Emerging Markets

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 17 (%) 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 Emerging Markets 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Invesco Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Invesco Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GM and Invesco Emerging Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Invesco Emerging

The main advantage of trading using opposite GM and Invesco Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Invesco Emerging 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 Emerging will offset losses from the drop in Invesco Emerging's long position.
The idea behind General Motors and Invesco Emerging Markets 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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