Correlation Between Dimensional International and Invesco International

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

Diversification Opportunities for Dimensional International and Invesco International

DimensionalInvescoDiversified AwayDimensionalInvescoDiversified Away100%
0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Dimensional and Invesco is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International Valu and Invesco International BuyBack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco International and Dimensional International 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 Dimensional International Value are associated (or correlated) with Invesco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco International has no effect on the direction of Dimensional International i.e., Dimensional International and Invesco International go up and down completely randomly.

Pair Corralation between Dimensional International and Invesco International

Given the investment horizon of 90 days Dimensional International is expected to generate 2.14 times less return on investment than Invesco International. But when comparing it to its historical volatility, Dimensional International Value is 1.28 times less risky than Invesco International. It trades about 0.26 of its potential returns per unit of risk. Invesco International BuyBack is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest  4,153  in Invesco International BuyBack on November 29, 2024 and sell it today you would earn a total of  396.00  from holding Invesco International BuyBack or generate 9.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Dimensional International Valu  vs.  Invesco International BuyBack

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 0510
JavaScript chart by amCharts 3.21.15DFIV IPKW
       Timeline  
Dimensional International 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional International Value are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, Dimensional International may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb34.53535.53636.53737.53838.539
Invesco International 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco International BuyBack are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal forward-looking signals, Invesco International may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb39404142434445

Dimensional International and Invesco International Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.3-1.71-1.12-0.530.04160.661.271.882.5 0.10.20.30.40.50.60.7
JavaScript chart by amCharts 3.21.15DFIV IPKW
       Returns  

Pair Trading with Dimensional International and Invesco International

The main advantage of trading using opposite Dimensional International and Invesco International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International position performs unexpectedly, Invesco International 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 International will offset losses from the drop in Invesco International's long position.
The idea behind Dimensional International Value and Invesco International BuyBack 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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