Correlation Between Invesco Emerging and Western Asset
Can any of the company-specific risk be diversified away by investing in both Invesco Emerging and Western Asset 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 Emerging and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Emerging Markets and Western Asset Short, you can compare the effects of market volatilities on Invesco Emerging and Western Asset 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 Emerging with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Emerging and Western Asset.
Diversification Opportunities for Invesco Emerging and Western Asset
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and Western is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Emerging Markets and Western Asset Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Short and Invesco Emerging 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 Emerging Markets are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Short has no effect on the direction of Invesco Emerging i.e., Invesco Emerging and Western Asset go up and down completely randomly.
Pair Corralation between Invesco Emerging and Western Asset
Considering the 90-day investment horizon Invesco Emerging Markets is expected to generate 6.15 times more return on investment than Western Asset. However, Invesco Emerging is 6.15 times more volatile than Western Asset Short. It trades about 0.1 of its potential returns per unit of risk. Western Asset Short is currently generating about 0.26 per unit of risk. If you would invest 2,049 in Invesco Emerging Markets on September 1, 2024 and sell it today you would earn a total of 29.00 from holding Invesco Emerging Markets or generate 1.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Emerging Markets vs. Western Asset Short
Performance |
| Timeline |
| Invesco Emerging Markets |
| Western Asset Short |
Invesco Emerging and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Emerging and Western Asset
The main advantage of trading using opposite Invesco Emerging and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Emerging position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Invesco Emerging vs. iShares JP Morgan | Invesco Emerging vs. SPDR Bloomberg Barclays | Invesco Emerging vs. SPDR DoubleLine Emerging | Invesco Emerging vs. JPMorgan USD Emerging |
| Western Asset vs. Valued Advisers Trust | Western Asset vs. Columbia Diversified Fixed | Western Asset vs. Principal Exchange Traded Funds | Western Asset vs. Doubleline Etf Trust |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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