Correlation Between Invesco High and Invesco Select
Can any of the company-specific risk be diversified away by investing in both Invesco High and Invesco Select 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 Invesco High and Invesco Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco High Yield and Invesco Select Risk, you can compare the effects of market volatilities on Invesco High and Invesco Select 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 Invesco High with a short position of Invesco Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco High and Invesco Select.
Diversification Opportunities for Invesco High and Invesco Select
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and Invesco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Invesco High Yield and Invesco Select Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Select Risk and Invesco High 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 Invesco High Yield are associated (or correlated) with Invesco Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Select Risk has no effect on the direction of Invesco High i.e., Invesco High and Invesco Select go up and down completely randomly.
Pair Corralation between Invesco High and Invesco Select
Assuming the 90 days horizon Invesco High is expected to generate 1.67 times less return on investment than Invesco Select. But when comparing it to its historical volatility, Invesco High Yield is 2.21 times less risky than Invesco Select. It trades about 0.1 of its potential returns per unit of risk. Invesco Select Risk is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,199 in Invesco Select Risk on August 27, 2024 and sell it today you would earn a total of 338.00 from holding Invesco Select Risk or generate 28.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco High Yield vs. Invesco Select Risk
Performance |
| Timeline |
| Invesco High Yield |
| Invesco Select Risk |
Invesco High and Invesco Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco High and Invesco Select
The main advantage of trading using opposite Invesco High and Invesco Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco High position performs unexpectedly, Invesco Select 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 Select will offset losses from the drop in Invesco Select's long position.| Invesco High vs. James Balanced Golden | Invesco High vs. Wells Fargo Advantage | Invesco High vs. Global Gold Fund | Invesco High vs. The Gold Bullion |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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