Correlation Between Invesco FTSE and Invesco DWA
Can any of the company-specific risk be diversified away by investing in both Invesco FTSE and Invesco DWA 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 FTSE and Invesco DWA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco FTSE RAFI and Invesco DWA Consumer, you can compare the effects of market volatilities on Invesco FTSE and Invesco DWA 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 FTSE with a short position of Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco FTSE and Invesco DWA.
Diversification Opportunities for Invesco FTSE and Invesco DWA
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and Invesco is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and Invesco DWA Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Consumer and Invesco FTSE 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 FTSE RAFI are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Consumer has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and Invesco DWA go up and down completely randomly.
Pair Corralation between Invesco FTSE and Invesco DWA
Considering the 90-day investment horizon Invesco FTSE is expected to generate 1.35 times less return on investment than Invesco DWA. In addition to that, Invesco FTSE is 1.14 times more volatile than Invesco DWA Consumer. It trades about 0.36 of its total potential returns per unit of risk. Invesco DWA Consumer is currently generating about 0.55 per unit of volatility. If you would invest 10,377 in Invesco DWA Consumer on November 10, 2024 and sell it today you would earn a total of 811.00 from holding Invesco DWA Consumer or generate 7.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco FTSE RAFI vs. Invesco DWA Consumer
Performance |
| Timeline |
| Invesco FTSE RAFI |
| Invesco DWA Consumer |
Invesco FTSE and Invesco DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco FTSE and Invesco DWA
The main advantage of trading using opposite Invesco FTSE and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco FTSE position performs unexpectedly, Invesco DWA 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 DWA will offset losses from the drop in Invesco DWA's long position.| Invesco FTSE vs. Invesco FTSE RAFI | Invesco FTSE vs. Invesco FTSE RAFI | Invesco FTSE vs. Invesco FTSE RAFI | Invesco FTSE vs. Invesco DWA Developed |
| Invesco DWA vs. Invesco DWA Consumer | Invesco DWA vs. Invesco DWA Basic | Invesco DWA vs. Invesco DWA Industrials | Invesco DWA vs. Invesco DWA Utilities |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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