Correlation Between Invesco Dynamic and MicroSectors FANG
Can any of the company-specific risk be diversified away by investing in both Invesco Dynamic and MicroSectors FANG 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 Dynamic and MicroSectors FANG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Dynamic Large and MicroSectors FANG ETN, you can compare the effects of market volatilities on Invesco Dynamic and MicroSectors FANG 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 Dynamic with a short position of MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Dynamic and MicroSectors FANG.
Diversification Opportunities for Invesco Dynamic and MicroSectors FANG
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and MicroSectors is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Large and MicroSectors FANG ETN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG ETN and Invesco Dynamic 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 Dynamic Large are associated (or correlated) with MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG ETN has no effect on the direction of Invesco Dynamic i.e., Invesco Dynamic and MicroSectors FANG go up and down completely randomly.
Pair Corralation between Invesco Dynamic and MicroSectors FANG
Considering the 90-day investment horizon Invesco Dynamic is expected to generate 1.2 times less return on investment than MicroSectors FANG. But when comparing it to its historical volatility, Invesco Dynamic Large is 1.42 times less risky than MicroSectors FANG. It trades about 0.2 of its potential returns per unit of risk. MicroSectors FANG ETN is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 5,108 in MicroSectors FANG ETN on August 27, 2024 and sell it today you would earn a total of 262.00 from holding MicroSectors FANG ETN or generate 5.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Dynamic Large vs. MicroSectors FANG ETN
Performance |
| Timeline |
| Invesco Dynamic Large |
| MicroSectors FANG ETN |
Invesco Dynamic and MicroSectors FANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Dynamic and MicroSectors FANG
The main advantage of trading using opposite Invesco Dynamic and MicroSectors FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Dynamic position performs unexpectedly, MicroSectors FANG 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 MicroSectors FANG will offset losses from the drop in MicroSectors FANG's long position.The idea behind Invesco Dynamic Large and MicroSectors FANG ETN pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| MicroSectors FANG vs. Invesco DWA Utilities | MicroSectors FANG vs. Invesco Dynamic Large | MicroSectors FANG vs. Invesco Dynamic Large | MicroSectors FANG vs. HUMANA INC |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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