Correlation Between GM and Invesco FTSE

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

Diversification Opportunities for GM and Invesco FTSE

-0.42

Correlation Coefficient

GM  Invesco FTSE

Very good diversification

The 3 months correlation between GM and Invesco is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Invesco FTSE Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE Emerging 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 FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE Emerging has no effect on the direction of GM i.e., GM and Invesco FTSE go up and down completely randomly.

Pair Corralation between GM and Invesco FTSE

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.93 times more return on investment than Invesco FTSE. However, GM is 2.93 times more volatile than Invesco FTSE Emerging. It trades about -0.01 of its potential returns per unit of risk. Invesco FTSE Emerging is currently generating about -0.09 per unit of risk. If you would invest  4,946  in General Motors on December 2, 2024 and sell it today you would lose (33.00) from holding General Motors or give up 0.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Invesco FTSE Emerging

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Invesco FTSE Emerging

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco FTSE Emerging are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Invesco FTSE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and Invesco FTSE

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

The idea behind General Motors and Invesco FTSE Emerging 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.