Correlation Between GM and Invesco Solar

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

Diversification Opportunities for GM and Invesco Solar

-0.83

Correlation Coefficient

GM  Invesco Solar

Pay attention - limited upside

The 3 months correlation between GM and Invesco is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Invesco Solar Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Solar Energy 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 Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Solar Energy has no effect on the direction of GM i.e., GM and Invesco Solar go up and down completely randomly.

Pair Corralation between GM and Invesco Solar

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Invesco Solar. In addition to that, GM is 1.28 times more volatile than Invesco Solar Energy. It trades about -0.16 of its total potential returns per unit of risk. Invesco Solar Energy is currently generating about 0.02 per unit of volatility. If you would invest  1,831  in Invesco Solar Energy on September 14, 2024 and sell it today you would earn a total of  11.00  from holding Invesco Solar Energy or generate 0.6% return on investment over 90 days.

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

General Motors  vs.  Invesco Solar Energy

General Motors

Risk-Adjusted Performance

6 of 100

OK

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 Solar Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Solar Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with GM and Invesco Solar

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

The idea behind General Motors and Invesco Solar Energy 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.