Correlation Between Invesco CurrencyShares and Innovator Equity
Can any of the company-specific risk be diversified away by investing in both Invesco CurrencyShares and Innovator 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 Innovator 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 Innovator Equity Premium, you can compare the effects of market volatilities on Invesco CurrencyShares and Innovator 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 Innovator Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco CurrencyShares and Innovator Equity.
Diversification Opportunities for Invesco CurrencyShares and Innovator Equity
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Invesco and Innovator is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes and Innovator Equity Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Premium 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 Innovator Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Equity Premium has no effect on the direction of Invesco CurrencyShares i.e., Invesco CurrencyShares and Innovator Equity go up and down completely randomly.
Pair Corralation between Invesco CurrencyShares and Innovator Equity
Considering the 90-day investment horizon Invesco CurrencyShares Japanese is expected to generate 7.36 times more return on investment than Innovator Equity. However, Invesco CurrencyShares is 7.36 times more volatile than Innovator Equity Premium. It trades about 0.07 of its potential returns per unit of risk. Innovator Equity Premium is currently generating about 0.33 per unit of risk. If you would invest 5,867 in Invesco CurrencyShares Japanese on October 25, 2024 and sell it today you would earn a total of 32.00 from holding Invesco CurrencyShares Japanese or generate 0.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 44.44% |
| Values | Daily Returns |
Invesco CurrencyShares Japanes vs. Innovator Equity Premium
Performance |
| Timeline |
| Invesco CurrencyShares |
| Innovator Equity Premium |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Strong
Invesco CurrencyShares and Innovator Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco CurrencyShares and Innovator Equity
The main advantage of trading using opposite Invesco CurrencyShares and Innovator Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco CurrencyShares position performs unexpectedly, Innovator 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 Innovator Equity will offset losses from the drop in Innovator Equity's long position.The idea behind Invesco CurrencyShares Japanese and Innovator Equity Premium 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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