Correlation Between Invesco SP and Invesco International
Can any of the company-specific risk be diversified away by investing in both Invesco SP and Invesco International 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 SP and Invesco International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco SP MidCap and Invesco International Developed, you can compare the effects of market volatilities on Invesco SP and Invesco International 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 SP with a short position of Invesco International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Invesco International.
Diversification Opportunities for Invesco SP and Invesco International
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Invesco and Invesco is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP MidCap and Invesco International Develope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco International and Invesco SP 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 SP MidCap are associated (or correlated) with Invesco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco International has no effect on the direction of Invesco SP i.e., Invesco SP and Invesco International go up and down completely randomly.
Pair Corralation between Invesco SP and Invesco International
Given the investment horizon of 90 days Invesco SP MidCap is expected to generate 1.38 times more return on investment than Invesco International. However, Invesco SP is 1.38 times more volatile than Invesco International Developed. It trades about 0.1 of its potential returns per unit of risk. Invesco International Developed is currently generating about -0.02 per unit of risk. If you would invest 5,248 in Invesco SP MidCap on September 1, 2024 and sell it today you would earn a total of 905.00 from holding Invesco SP MidCap or generate 17.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco SP MidCap vs. Invesco International Develope
Performance |
| Timeline |
| Invesco SP MidCap |
| Invesco International |
Invesco SP and Invesco International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco SP and Invesco International
The main advantage of trading using opposite Invesco SP and Invesco International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, Invesco International 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 International will offset losses from the drop in Invesco International's long position.The idea behind Invesco SP MidCap and Invesco International Developed 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.| Invesco International vs. iShares ESG Aggregate | Invesco International vs. SPDR MSCI Emerging | Invesco International vs. Aquagold International | Invesco International vs. Thrivent High Yield |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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