Correlation Between Invesco CurrencyShares and Invesco Variable
Can any of the company-specific risk be diversified away by investing in both Invesco CurrencyShares and Invesco Variable 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 Invesco Variable 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 Invesco Variable Rate, you can compare the effects of market volatilities on Invesco CurrencyShares and Invesco Variable 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 Invesco Variable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco CurrencyShares and Invesco Variable.
Diversification Opportunities for Invesco CurrencyShares and Invesco Variable
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Invesco and Invesco is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes and Invesco Variable Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Variable Rate 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 Invesco Variable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Variable Rate has no effect on the direction of Invesco CurrencyShares i.e., Invesco CurrencyShares and Invesco Variable go up and down completely randomly.
Pair Corralation between Invesco CurrencyShares and Invesco Variable
Considering the 90-day investment horizon Invesco CurrencyShares Japanese is expected to generate 1.37 times more return on investment than Invesco Variable. However, Invesco CurrencyShares is 1.37 times more volatile than Invesco Variable Rate. It trades about 0.04 of its potential returns per unit of risk. Invesco Variable Rate is currently generating about -0.19 per unit of risk. If you would invest 6,266 in Invesco CurrencyShares Japanese on January 8, 2025 and sell it today you would earn a total of 34.00 from holding Invesco CurrencyShares Japanese or generate 0.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco CurrencyShares Japanes vs. Invesco Variable Rate
Performance |
| Timeline |
| Invesco CurrencyShares |
| Invesco Variable Rate |
Invesco CurrencyShares and Invesco Variable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco CurrencyShares and Invesco Variable
The main advantage of trading using opposite Invesco CurrencyShares and Invesco Variable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco CurrencyShares position performs unexpectedly, Invesco Variable 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 Variable will offset losses from the drop in Invesco Variable's long position.The idea behind Invesco CurrencyShares Japanese and Invesco Variable Rate 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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