Correlation Between Invesco High and Sprott Focus
Can any of the company-specific risk be diversified away by investing in both Invesco High and Sprott Focus 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 High and Sprott Focus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco High Income and Sprott Focus Trust, you can compare the effects of market volatilities on Invesco High and Sprott Focus 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 High with a short position of Sprott Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco High and Sprott Focus.
Diversification Opportunities for Invesco High and Sprott Focus
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and Sprott is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Invesco High Income and Sprott Focus Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Focus Trust and Invesco High 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 High Income are associated (or correlated) with Sprott Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Focus Trust has no effect on the direction of Invesco High i.e., Invesco High and Sprott Focus go up and down completely randomly.
Pair Corralation between Invesco High and Sprott Focus
Given the investment horizon of 90 days Invesco High is expected to generate 6.75 times less return on investment than Sprott Focus. But when comparing it to its historical volatility, Invesco High Income is 9.2 times less risky than Sprott Focus. It trades about 0.23 of its potential returns per unit of risk. Sprott Focus Trust is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 780.00 in Sprott Focus Trust on August 30, 2024 and sell it today you would earn a total of 29.00 from holding Sprott Focus Trust or generate 3.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Invesco High Income vs. Sprott Focus Trust
Performance |
| Timeline |
| Invesco High Income |
| Sprott Focus Trust |
Invesco High and Sprott Focus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco High and Sprott Focus
The main advantage of trading using opposite Invesco High and Sprott Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco High position performs unexpectedly, Sprott Focus 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 Sprott Focus will offset losses from the drop in Sprott Focus' long position.| Invesco High vs. MFS Investment Grade | Invesco High vs. Eaton Vance National | Invesco High vs. Nuveen California Select | Invesco High vs. Federated Premier Municipal |
| Sprott Focus vs. MFS Investment Grade | Sprott Focus vs. Invesco High Income | Sprott Focus vs. Eaton Vance National | Sprott Focus vs. Nuveen California Select |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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