Correlation Between Invesco Energy and Aqr Small
Can any of the company-specific risk be diversified away by investing in both Invesco Energy and Aqr Small 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 Energy and Aqr Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Energy Fund and Aqr Small Cap, you can compare the effects of market volatilities on Invesco Energy and Aqr Small 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 Energy with a short position of Aqr Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Energy and Aqr Small.
Diversification Opportunities for Invesco Energy and Aqr Small
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and Aqr is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Energy Fund and Aqr Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Small Cap and Invesco Energy 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 Energy Fund are associated (or correlated) with Aqr Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Small Cap has no effect on the direction of Invesco Energy i.e., Invesco Energy and Aqr Small go up and down completely randomly.
Pair Corralation between Invesco Energy and Aqr Small
Assuming the 90 days horizon Invesco Energy is expected to generate 3.58 times less return on investment than Aqr Small. But when comparing it to its historical volatility, Invesco Energy Fund is 1.16 times less risky than Aqr Small. It trades about 0.02 of its potential returns per unit of risk. Aqr Small Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,404 in Aqr Small Cap on September 13, 2024 and sell it today you would earn a total of 653.00 from holding Aqr Small Cap or generate 46.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Energy Fund vs. Aqr Small Cap
Performance |
| Timeline |
| Invesco Energy |
| Aqr Small Cap |
Invesco Energy and Aqr Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Energy and Aqr Small
The main advantage of trading using opposite Invesco Energy and Aqr Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Energy position performs unexpectedly, Aqr Small 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 Aqr Small will offset losses from the drop in Aqr Small's long position.| Invesco Energy vs. Us Government Securities | Invesco Energy vs. Payden Government Fund | Invesco Energy vs. Intermediate Government Bond | Invesco Energy vs. Prudential Government Income |
| Aqr Small vs. Dreyfusstandish Global Fixed | Aqr Small vs. The National Tax Free | Aqr Small vs. Multisector Bond Sma | Aqr Small vs. Dws Government Money |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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