Correlation Between GM and Invesco BulletShares

Can any of the company-specific risk be diversified away by investing in both GM and Invesco BulletShares 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 BulletShares 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 BulletShares 2027, you can compare the effects of market volatilities on GM and Invesco BulletShares 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 BulletShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Invesco BulletShares.

Diversification Opportunities for GM and Invesco BulletShares

0.53

Correlation Coefficient

GM  Invesco BulletShares

Very weak diversification

The 3 months correlation between GM and Invesco is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Invesco BulletShares 2027 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco BulletShares 2027 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 BulletShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco BulletShares 2027 has no effect on the direction of GM i.e., GM and Invesco BulletShares go up and down completely randomly.

Pair Corralation between GM and Invesco BulletShares

Allowing for the 90-day total investment horizon General Motors is expected to generate 13.26 times more return on investment than Invesco BulletShares. However, GM is 13.26 times more volatile than Invesco BulletShares 2027. It trades about 0.13 of its potential returns per unit of risk. Invesco BulletShares 2027 is currently generating about 0.15 per unit of risk. If you would invest  5,154  in General Motors on August 30, 2024 and sell it today you would earn a total of  396.00  from holding General Motors or generate 7.68% return on investment over 90 days.

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

General Motors  vs.  Invesco BulletShares 2027

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) 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 BulletShares 2027

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco BulletShares 2027 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, Invesco BulletShares is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GM and Invesco BulletShares

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

The idea behind General Motors and Invesco BulletShares 2027 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.