Correlation Between Invesco CurrencyShares and Dimensional Equity
Can any of the company-specific risk be diversified away by investing in both Invesco CurrencyShares and Dimensional Equity 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 CurrencyShares and Dimensional Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco CurrencyShares Japanese and Dimensional Equity ETF, you can compare the effects of market volatilities on Invesco CurrencyShares and Dimensional Equity 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 CurrencyShares with a short position of Dimensional Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco CurrencyShares and Dimensional Equity.
Diversification Opportunities for Invesco CurrencyShares and Dimensional Equity
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Invesco and Dimensional is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes and Dimensional Equity ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Equity ETF and Invesco CurrencyShares 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 CurrencyShares Japanese are associated (or correlated) with Dimensional Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Equity ETF has no effect on the direction of Invesco CurrencyShares i.e., Invesco CurrencyShares and Dimensional Equity go up and down completely randomly.
Pair Corralation between Invesco CurrencyShares and Dimensional Equity
Considering the 90-day investment horizon Invesco CurrencyShares Japanese is expected to under-perform the Dimensional Equity. But the etf apears to be less risky and, when comparing its historical volatility, Invesco CurrencyShares Japanese is 1.24 times less risky than Dimensional Equity. The etf trades about -0.04 of its potential returns per unit of risk. The Dimensional Equity ETF is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,829 in Dimensional Equity ETF on August 26, 2024 and sell it today you would earn a total of 1,688 from holding Dimensional Equity ETF or generate 34.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco CurrencyShares Japanes vs. Dimensional Equity ETF
Performance |
| Timeline |
| Invesco CurrencyShares |
| Dimensional Equity ETF |
Invesco CurrencyShares and Dimensional Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco CurrencyShares and Dimensional Equity
The main advantage of trading using opposite Invesco CurrencyShares and Dimensional Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco CurrencyShares position performs unexpectedly, Dimensional Equity 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 Dimensional Equity will offset losses from the drop in Dimensional Equity's long position.The idea behind Invesco CurrencyShares Japanese and Dimensional Equity ETF 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.
| Dimensional Equity vs. Dimensional Small Cap | Dimensional Equity vs. Dimensional Targeted Value | Dimensional Equity vs. Dimensional Core Equity | Dimensional Equity vs. Dimensional Core Equity |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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