Correlation Between GM and Invesco Balanced

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

Diversification Opportunities for GM and Invesco Balanced

-0.24

Correlation Coefficient

GM  Invesco Balanced

Very good diversification

The 3 months correlation between GM and Invesco is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Invesco Balanced Risk Modity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Balanced Risk 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 Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Balanced Risk has no effect on the direction of GM i.e., GM and Invesco Balanced go up and down completely randomly.

Pair Corralation between GM and Invesco Balanced

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Invesco Balanced. In addition to that, GM is 1.94 times more volatile than Invesco Balanced Risk Modity. It trades about -0.31 of its total potential returns per unit of risk. Invesco Balanced Risk Modity is currently generating about -0.24 per unit of volatility. If you would invest  665.00  in Invesco Balanced Risk Modity on September 25, 2024 and sell it today you would lose (38.00) from holding Invesco Balanced Risk Modity or give up 5.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Invesco Balanced Risk Modity

General Motors

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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 Balanced Risk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Balanced Risk Modity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with GM and Invesco Balanced

The main advantage of trading using opposite GM and Invesco Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Invesco Balanced 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 Balanced will offset losses from the drop in Invesco Balanced's long position.

The idea behind General Motors and Invesco Balanced Risk Modity 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.