Correlation Between Invesco Aerospace and Themes Transatlantic
Can any of the company-specific risk be diversified away by investing in both Invesco Aerospace and Themes Transatlantic 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 Aerospace and Themes Transatlantic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Aerospace Defense and Themes Transatlantic Defense, you can compare the effects of market volatilities on Invesco Aerospace and Themes Transatlantic 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 Aerospace with a short position of Themes Transatlantic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Aerospace and Themes Transatlantic.
Diversification Opportunities for Invesco Aerospace and Themes Transatlantic
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Invesco and Themes is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Aerospace Defense and Themes Transatlantic Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Transatlantic and Invesco Aerospace 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 Aerospace Defense are associated (or correlated) with Themes Transatlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Transatlantic has no effect on the direction of Invesco Aerospace i.e., Invesco Aerospace and Themes Transatlantic go up and down completely randomly.
Pair Corralation between Invesco Aerospace and Themes Transatlantic
Considering the 90-day investment horizon Invesco Aerospace is expected to generate 1.19 times less return on investment than Themes Transatlantic. In addition to that, Invesco Aerospace is 1.12 times more volatile than Themes Transatlantic Defense. It trades about 0.25 of its total potential returns per unit of risk. Themes Transatlantic Defense is currently generating about 0.33 per unit of volatility. If you would invest 2,531 in Themes Transatlantic Defense on November 3, 2024 and sell it today you would earn a total of 172.00 from holding Themes Transatlantic Defense or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Aerospace Defense vs. Themes Transatlantic Defense
Performance |
| Timeline |
| Invesco Aerospace Defense |
| Themes Transatlantic |
Invesco Aerospace and Themes Transatlantic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Aerospace and Themes Transatlantic
The main advantage of trading using opposite Invesco Aerospace and Themes Transatlantic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Aerospace position performs unexpectedly, Themes Transatlantic 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 Themes Transatlantic will offset losses from the drop in Themes Transatlantic's long position.| Invesco Aerospace vs. SPDR SP Aerospace | Invesco Aerospace vs. iShares Aerospace Defense | Invesco Aerospace vs. Invesco Dynamic Building | Invesco Aerospace vs. Invesco Dynamic Semiconductors |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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