Correlation Between Invesco FTSE and Invesco Health
Can any of the company-specific risk be diversified away by investing in both Invesco FTSE and Invesco Health 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 Health 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 Health Care, you can compare the effects of market volatilities on Invesco FTSE and Invesco Health 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 Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco FTSE and Invesco Health.
Diversification Opportunities for Invesco FTSE and Invesco Health
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and Invesco is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and Invesco Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Health Care 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 Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Health Care has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and Invesco Health go up and down completely randomly.
Pair Corralation between Invesco FTSE and Invesco Health
Assuming the 90 days trading horizon Invesco FTSE RAFI is expected to generate 0.9 times more return on investment than Invesco Health. However, Invesco FTSE RAFI is 1.11 times less risky than Invesco Health. It trades about 0.05 of its potential returns per unit of risk. Invesco Health Care is currently generating about 0.02 per unit of risk. If you would invest 179,470 in Invesco FTSE RAFI on January 25, 2025 and sell it today you would earn a total of 36,155 from holding Invesco FTSE RAFI or generate 20.15% 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 Health Care
Performance |
| Timeline |
| Invesco FTSE RAFI |
| Invesco Health Care |
Invesco FTSE and Invesco Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco FTSE and Invesco Health
The main advantage of trading using opposite Invesco FTSE and Invesco Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco FTSE position performs unexpectedly, Invesco Health 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 Health will offset losses from the drop in Invesco Health's long position.| Invesco FTSE vs. Invesco MSCI Emerging | Invesco FTSE vs. Invesco EURO STOXX | Invesco FTSE vs. Invesco Markets Plc | Invesco FTSE vs. Invesco FTSE Emerging |
| Invesco Health vs. Vanguard FTSE Developed | Invesco Health vs. Leverage Shares 2x | Invesco Health vs. Amundi Index Solutions | Invesco Health vs. Amundi Index Solutions |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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