Correlation Between Henderson European and Invesco European
Can any of the company-specific risk be diversified away by investing in both Henderson European and Invesco European 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 Henderson European and Invesco European into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Henderson European Focus and Invesco European Small, you can compare the effects of market volatilities on Henderson European and Invesco European 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 Henderson European with a short position of Invesco European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henderson European and Invesco European.
Diversification Opportunities for Henderson European and Invesco European
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Henderson and Invesco is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Henderson European Focus and Invesco European Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco European Small and Henderson European 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 Henderson European Focus are associated (or correlated) with Invesco European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco European Small has no effect on the direction of Henderson European i.e., Henderson European and Invesco European go up and down completely randomly.
Pair Corralation between Henderson European and Invesco European
Assuming the 90 days horizon Henderson European Focus is expected to generate 1.28 times more return on investment than Invesco European. However, Henderson European is 1.28 times more volatile than Invesco European Small. It trades about -0.2 of its potential returns per unit of risk. Invesco European Small is currently generating about -0.29 per unit of risk. If you would invest 4,487 in Henderson European Focus on August 26, 2024 and sell it today you would lose (186.00) from holding Henderson European Focus or give up 4.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Henderson European Focus vs. Invesco European Small
Performance |
| Timeline |
| Henderson European Focus |
| Invesco European Small |
Henderson European and Invesco European Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Henderson European and Invesco European
The main advantage of trading using opposite Henderson European and Invesco European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Henderson European position performs unexpectedly, Invesco European 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 European will offset losses from the drop in Invesco European's long position.| Henderson European vs. Henderson European Focus | Henderson European vs. Invesco European Small | Henderson European vs. Henderson Global Equity | Henderson European vs. Oppenheimer Developing Markets |
| Invesco European vs. Invesco Municipal Income | Invesco European vs. Invesco Municipal Income | Invesco European vs. Invesco Municipal Income | Invesco European vs. Oppenheimer Rising Dividends |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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