Correlation Between Invesco International and Invesco Main
Can any of the company-specific risk be diversified away by investing in both Invesco International and Invesco Main 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 International and Invesco Main into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco International Diversified and Invesco Main Street, you can compare the effects of market volatilities on Invesco International and Invesco Main 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 International with a short position of Invesco Main. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco International and Invesco Main.
Diversification Opportunities for Invesco International and Invesco Main
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Invesco and Invesco is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Invesco International Diversif and Invesco Main Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Main Street and Invesco International 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 International Diversified are associated (or correlated) with Invesco Main. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Main Street has no effect on the direction of Invesco International i.e., Invesco International and Invesco Main go up and down completely randomly.
Pair Corralation between Invesco International and Invesco Main
Assuming the 90 days horizon Invesco International is expected to generate 2.81 times less return on investment than Invesco Main. But when comparing it to its historical volatility, Invesco International Diversified is 1.52 times less risky than Invesco Main. It trades about 0.04 of its potential returns per unit of risk. Invesco Main Street is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,850 in Invesco Main Street on September 14, 2024 and sell it today you would earn a total of 490.00 from holding Invesco Main Street or generate 26.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco International Diversif vs. Invesco Main Street
Performance |
| Timeline |
| Invesco International |
| Invesco Main Street |
Invesco International and Invesco Main Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco International and Invesco Main
The main advantage of trading using opposite Invesco International and Invesco Main positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco International position performs unexpectedly, Invesco Main 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 Main will offset losses from the drop in Invesco Main's long position.The idea behind Invesco International Diversified and Invesco Main Street 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.
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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