Correlation Between Invesco FTSE and Litman Gregory
Can any of the company-specific risk be diversified away by investing in both Invesco FTSE and Litman Gregory 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 Litman Gregory 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 Litman Gregory Funds, you can compare the effects of market volatilities on Invesco FTSE and Litman Gregory 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 Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco FTSE and Litman Gregory.
Diversification Opportunities for Invesco FTSE and Litman Gregory
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Invesco and Litman is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and Litman Gregory Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Funds 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 Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Funds has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and Litman Gregory go up and down completely randomly.
Pair Corralation between Invesco FTSE and Litman Gregory
Considering the 90-day investment horizon Invesco FTSE RAFI is expected to under-perform the Litman Gregory. In addition to that, Invesco FTSE is 1.07 times more volatile than Litman Gregory Funds. It trades about -0.03 of its total potential returns per unit of risk. Litman Gregory Funds is currently generating about 0.26 per unit of volatility. If you would invest 932.00 in Litman Gregory Funds on September 3, 2024 and sell it today you would earn a total of 39.00 from holding Litman Gregory Funds or generate 4.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco FTSE RAFI vs. Litman Gregory Funds
Performance |
| Timeline |
| Invesco FTSE RAFI |
| Litman Gregory Funds |
Invesco FTSE and Litman Gregory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco FTSE and Litman Gregory
The main advantage of trading using opposite Invesco FTSE and Litman Gregory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco FTSE position performs unexpectedly, Litman Gregory 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 Litman Gregory will offset losses from the drop in Litman Gregory's long position.| Invesco FTSE vs. Invesco FTSE RAFI | Invesco FTSE vs. Invesco FTSE RAFI | Invesco FTSE vs. Invesco FTSE RAFI | Invesco FTSE vs. Invesco FTSE RAFI |
| Litman Gregory vs. FT Vest Equity | Litman Gregory vs. Northern Lights | Litman Gregory vs. Dimensional International High | Litman Gregory vs. JPMorgan Fundamental Data |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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