Correlation Between Invesco Aerospace and Energy Select
Can any of the company-specific risk be diversified away by investing in both Invesco Aerospace and Energy Select 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 Energy Select 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 Energy Select Sector, you can compare the effects of market volatilities on Invesco Aerospace and Energy Select 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 Energy Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Aerospace and Energy Select.
Diversification Opportunities for Invesco Aerospace and Energy Select
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and Energy is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Aerospace Defense and Energy Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Select Sector 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 Energy Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Select Sector has no effect on the direction of Invesco Aerospace i.e., Invesco Aerospace and Energy Select go up and down completely randomly.
Pair Corralation between Invesco Aerospace and Energy Select
Considering the 90-day investment horizon Invesco Aerospace Defense is expected to generate 0.8 times more return on investment than Energy Select. However, Invesco Aerospace Defense is 1.25 times less risky than Energy Select. It trades about 0.15 of its potential returns per unit of risk. Energy Select Sector is currently generating about 0.07 per unit of risk. If you would invest 8,737 in Invesco Aerospace Defense on August 26, 2024 and sell it today you would earn a total of 3,367 from holding Invesco Aerospace Defense or generate 38.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Aerospace Defense vs. Energy Select Sector
Performance |
| Timeline |
| Invesco Aerospace Defense |
| Energy Select Sector |
Invesco Aerospace and Energy Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Aerospace and Energy Select
The main advantage of trading using opposite Invesco Aerospace and Energy Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Aerospace position performs unexpectedly, Energy Select 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 Energy Select will offset losses from the drop in Energy Select's long position.| Invesco Aerospace vs. Gabelli ETFs Trust | Invesco Aerospace vs. First Trust Exchange Traded | Invesco Aerospace vs. Northern Lights | Invesco Aerospace vs. First Trust Exchange Traded |
| Energy Select vs. Financial Select Sector | Energy Select vs. Health Care Select | Energy Select vs. Technology Select Sector | Energy Select vs. Utilities Select Sector |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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