Correlation Between Invesco Investment and US Treasury
Can any of the company-specific risk be diversified away by investing in both Invesco Investment and US Treasury 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 Investment and US Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Investment Grade and US Treasury 20, you can compare the effects of market volatilities on Invesco Investment and US Treasury 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 Investment with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Investment and US Treasury.
Diversification Opportunities for Invesco Investment and US Treasury
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Invesco and UTWY is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Investment Grade and US Treasury 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 20 and Invesco Investment 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 Investment Grade are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 20 has no effect on the direction of Invesco Investment i.e., Invesco Investment and US Treasury go up and down completely randomly.
Pair Corralation between Invesco Investment and US Treasury
Given the investment horizon of 90 days Invesco Investment Grade is expected to generate 0.28 times more return on investment than US Treasury. However, Invesco Investment Grade is 3.55 times less risky than US Treasury. It trades about 0.07 of its potential returns per unit of risk. US Treasury 20 is currently generating about -0.03 per unit of risk. If you would invest 2,221 in Invesco Investment Grade on August 27, 2024 and sell it today you would earn a total of 200.00 from holding Invesco Investment Grade or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 84.88% |
| Values | Daily Returns |
Invesco Investment Grade vs. US Treasury 20
Performance |
| Timeline |
| Invesco Investment Grade |
| US Treasury 20 |
Invesco Investment and US Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Investment and US Treasury
The main advantage of trading using opposite Invesco Investment and US Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Investment position performs unexpectedly, US Treasury 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 US Treasury will offset losses from the drop in US Treasury's long position.| Invesco Investment vs. Dimensional ETF Trust | Invesco Investment vs. Dimensional ETF Trust | Invesco Investment vs. Dimensional Core Equity | Invesco Investment vs. Dimensional ETF Trust |
| US Treasury vs. US Treasury 30 | US Treasury vs. US Treasury 5 | US Treasury vs. US Treasury 7 | US Treasury vs. US Treasury 3 |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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