Correlation Between US Treasury and Invesco Aaa
Can any of the company-specific risk be diversified away by investing in both US Treasury and Invesco Aaa 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 US Treasury and Invesco Aaa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Treasury 12 and Invesco Aaa Clo, you can compare the effects of market volatilities on US Treasury and Invesco Aaa 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 US Treasury with a short position of Invesco Aaa. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and Invesco Aaa.
Diversification Opportunities for US Treasury and Invesco Aaa
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between OBIL and Invesco is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 12 and Invesco Aaa Clo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Aaa Clo and US Treasury 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 US Treasury 12 are associated (or correlated) with Invesco Aaa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Aaa Clo has no effect on the direction of US Treasury i.e., US Treasury and Invesco Aaa go up and down completely randomly.
Pair Corralation between US Treasury and Invesco Aaa
Given the investment horizon of 90 days US Treasury is expected to generate 1.4 times less return on investment than Invesco Aaa. But when comparing it to its historical volatility, US Treasury 12 is 1.19 times less risky than Invesco Aaa. It trades about 0.46 of its potential returns per unit of risk. Invesco Aaa Clo is currently generating about 0.54 of returns per unit of risk over similar time horizon. If you would invest 2,553 in Invesco Aaa Clo on September 1, 2024 and sell it today you would earn a total of 12.00 from holding Invesco Aaa Clo or generate 0.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
US Treasury 12 vs. Invesco Aaa Clo
Performance |
| Timeline |
| US Treasury 12 |
| Invesco Aaa Clo |
US Treasury and Invesco Aaa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Treasury and Invesco Aaa
The main advantage of trading using opposite US Treasury and Invesco Aaa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Treasury position performs unexpectedly, Invesco Aaa 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 Aaa will offset losses from the drop in Invesco Aaa's long position.| US Treasury vs. SPDR Barclays Long | US Treasury vs. SPDR Portfolio Intermediate | US Treasury vs. SPDR Barclays Short | US Treasury vs. SPDR Barclays Intermediate |
| Invesco Aaa vs. iShares Interest Rate | Invesco Aaa vs. iShares Interest Rate | Invesco Aaa vs. iShares Edge Investment | Invesco Aaa vs. iShares Inflation Hedged |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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