Correlation Between Invesco Asia and Henderson European

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Can any of the company-specific risk be diversified away by investing in both Invesco Asia and Henderson European 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 Asia and Henderson European into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Asia Pacific and Henderson European Focus, you can compare the effects of market volatilities on Invesco Asia and Henderson European 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 Asia with a short position of Henderson European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Asia and Henderson European.

Diversification Opportunities for Invesco Asia and Henderson European

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Invesco and Henderson is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Asia Pacific and Henderson European Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henderson European Focus and Invesco Asia 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 Asia Pacific are associated (or correlated) with Henderson European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henderson European Focus has no effect on the direction of Invesco Asia i.e., Invesco Asia and Henderson European go up and down completely randomly.

Pair Corralation between Invesco Asia and Henderson European

Assuming the 90 days horizon Invesco Asia is expected to generate 1.47 times less return on investment than Henderson European. But when comparing it to its historical volatility, Invesco Asia Pacific is 1.1 times less risky than Henderson European. It trades about 0.03 of its potential returns per unit of risk. Henderson European Focus is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,176  in Henderson European Focus on September 12, 2024 and sell it today you would earn a total of  417.00  from holding Henderson European Focus or generate 9.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Invesco Asia Pacific  vs.  Henderson European Focus

 Performance 
       Timeline  
Invesco Asia Pacific 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Asia Pacific are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Invesco Asia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Henderson European Focus 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Henderson European Focus has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Henderson European is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Asia and Henderson European Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Invesco Asia and Henderson European

The main advantage of trading using opposite Invesco Asia and Henderson European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Asia position performs unexpectedly, Henderson European 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 Henderson European will offset losses from the drop in Henderson European's long position.
The idea behind Invesco Asia Pacific and Henderson European Focus 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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