Correlation Between GM and Invesco Physical

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

Diversification Opportunities for GM and Invesco Physical

0.65

Correlation Coefficient

GM  Invesco Physical

Poor diversification

The 3 months correlation between GM and Invesco is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Invesco Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Physical Gold 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 Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Physical Gold has no effect on the direction of GM i.e., GM and Invesco Physical go up and down completely randomly.

Pair Corralation between GM and Invesco Physical

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.65 times more return on investment than Invesco Physical. However, GM is 2.65 times more volatile than Invesco Physical Gold. It trades about 0.09 of its potential returns per unit of risk. Invesco Physical Gold is currently generating about 0.19 per unit of risk. If you would invest  4,620  in General Motors on September 13, 2024 and sell it today you would earn a total of  610.00  from holding General Motors or generate 13.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

General Motors  vs.  Invesco Physical Gold

General Motors

Risk-Adjusted Performance

7 of 100

OK

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 Physical Gold

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Physical Gold are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Invesco Physical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and Invesco Physical

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

The idea behind General Motors and Invesco Physical Gold 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.