Correlation Between Global X and Invesco DWA
Can any of the company-specific risk be diversified away by investing in both Global X and Invesco DWA 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 Global X and Invesco DWA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Clean and Invesco DWA Utilities, you can compare the effects of market volatilities on Global X and Invesco DWA 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 Global X with a short position of Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Invesco DWA.
Diversification Opportunities for Global X and Invesco DWA
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Invesco is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Global X Clean and Invesco DWA Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Utilities and Global X 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 Global X Clean are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Utilities has no effect on the direction of Global X i.e., Global X and Invesco DWA go up and down completely randomly.
Pair Corralation between Global X and Invesco DWA
Given the investment horizon of 90 days Global X is expected to generate 5.93 times less return on investment than Invesco DWA. But when comparing it to its historical volatility, Global X Clean is 1.06 times less risky than Invesco DWA. It trades about 0.04 of its potential returns per unit of risk. Invesco DWA Utilities is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 3,796 in Invesco DWA Utilities on August 30, 2024 and sell it today you would earn a total of 464.00 from holding Invesco DWA Utilities or generate 12.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X Clean vs. Invesco DWA Utilities
Performance |
| Timeline |
| Global X Clean |
| Invesco DWA Utilities |
Global X and Invesco DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and Invesco DWA
The main advantage of trading using opposite Global X and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, Invesco DWA 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 DWA will offset losses from the drop in Invesco DWA's long position.| Global X vs. Global X Renewable | Global X vs. Global X AgTech | Global X vs. First Trust Water | Global X vs. Global X Aging |
| Invesco DWA vs. Invesco DWA Consumer | Invesco DWA vs. Invesco DWA Basic | Invesco DWA vs. Invesco Dynamic Large |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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