Correlation Between Invesco DWA and Westwood Quality
Can any of the company-specific risk be diversified away by investing in both Invesco DWA and Westwood Quality 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 DWA and Westwood Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco DWA Healthcare and Westwood Quality Smallcap, you can compare the effects of market volatilities on Invesco DWA and Westwood Quality 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 DWA with a short position of Westwood Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DWA and Westwood Quality.
Diversification Opportunities for Invesco DWA and Westwood Quality
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Invesco and Westwood is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Healthcare and Westwood Quality Smallcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Quality Smallcap and Invesco DWA 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 DWA Healthcare are associated (or correlated) with Westwood Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Quality Smallcap has no effect on the direction of Invesco DWA i.e., Invesco DWA and Westwood Quality go up and down completely randomly.
Pair Corralation between Invesco DWA and Westwood Quality
Considering the 90-day investment horizon Invesco DWA is expected to generate 2.72 times less return on investment than Westwood Quality. In addition to that, Invesco DWA is 1.05 times more volatile than Westwood Quality Smallcap. It trades about 0.03 of its total potential returns per unit of risk. Westwood Quality Smallcap is currently generating about 0.1 per unit of volatility. If you would invest 2,024 in Westwood Quality Smallcap on September 3, 2024 and sell it today you would earn a total of 318.00 from holding Westwood Quality Smallcap or generate 15.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco DWA Healthcare vs. Westwood Quality Smallcap
Performance |
| Timeline |
| Invesco DWA Healthcare |
| Westwood Quality Smallcap |
Invesco DWA and Westwood Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco DWA and Westwood Quality
The main advantage of trading using opposite Invesco DWA and Westwood Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DWA position performs unexpectedly, Westwood Quality 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 Westwood Quality will offset losses from the drop in Westwood Quality's long position.| Invesco DWA vs. Vanguard Consumer Staples | Invesco DWA vs. Vanguard Financials Index | Invesco DWA vs. Vanguard Information Technology | Invesco DWA vs. Vanguard Consumer Discretionary |
| Westwood Quality vs. Siit Large Cap | Westwood Quality vs. Qs Large Cap | Westwood Quality vs. Qs Large Cap | Westwood Quality vs. Jhancock Disciplined Value |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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