Correlation Between GM and Fundo Invest

Can any of the company-specific risk be diversified away by investing in both GM and Fundo Invest 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 Fundo Invest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Fundo Invest Imobiliario, you can compare the effects of market volatilities on GM and Fundo Invest 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 Fundo Invest. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fundo Invest.

Diversification Opportunities for GM and Fundo Invest

-0.78

Correlation Coefficient

GM  Fundo Invest

Pay attention - limited upside

The 3 months correlation between GM and Fundo is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fundo Invest Imobiliario in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundo Invest Imobiliario 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 Fundo Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundo Invest Imobiliario has no effect on the direction of GM i.e., GM and Fundo Invest go up and down completely randomly.

Pair Corralation between GM and Fundo Invest

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.74 times more return on investment than Fundo Invest. However, General Motors is 1.36 times less risky than Fundo Invest. It trades about 0.09 of its potential returns per unit of risk. Fundo Invest Imobiliario is currently generating about -0.08 per unit of risk. If you would invest  4,833  in General Motors on September 4, 2024 and sell it today you would earn a total of  671.00  from holding General Motors or generate 13.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

General Motors  vs.  Fundo Invest Imobiliario

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.

Fundo Invest Imobiliario

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fundo Invest Imobiliario has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with GM and Fundo Invest

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

The idea behind General Motors and Fundo Invest Imobiliario 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.