Correlation Between Global X and Invesco DWA
Can any of the company-specific risk be diversified away by investing in both Global X and Invesco DWA 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 Global X and Invesco DWA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Thematic and Invesco DWA Utilities, you can compare the effects of market volatilities on Global X and Invesco DWA 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 Global X with a short position of Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Invesco DWA.
Diversification Opportunities for Global X and Invesco DWA
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Invesco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Global X Thematic and Invesco DWA Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Utilities and Global X 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 Global X Thematic are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Utilities has no effect on the direction of Global X i.e., Global X and Invesco DWA go up and down completely randomly.
Pair Corralation between Global X and Invesco DWA
Given the investment horizon of 90 days Global X is expected to generate 3.96 times less return on investment than Invesco DWA. In addition to that, Global X is 1.58 times more volatile than Invesco DWA Utilities. It trades about 0.01 of its total potential returns per unit of risk. Invesco DWA Utilities is currently generating about 0.06 per unit of volatility. If you would invest 3,311 in Invesco DWA Utilities on August 27, 2024 and sell it today you would earn a total of 916.00 from holding Invesco DWA Utilities or generate 27.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X Thematic vs. Invesco DWA Utilities
Performance |
| Timeline |
| Global X Thematic |
| Invesco DWA Utilities |
Global X and Invesco DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and Invesco DWA
The main advantage of trading using opposite Global X and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, Invesco DWA 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 DWA will offset losses from the drop in Invesco DWA's long position.The idea behind Global X Thematic and Invesco DWA Utilities 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.| Invesco DWA vs. Global X CleanTech | Invesco DWA vs. Global X Clean | Invesco DWA vs. Global X Wind | Invesco DWA vs. Global X Thematic |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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