Correlation Between American Funds and Invesco Global
Can any of the company-specific risk be diversified away by investing in both American Funds and Invesco Global 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 American Funds and Invesco Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2040 and Invesco Global Health, you can compare the effects of market volatilities on American Funds and Invesco Global 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 American Funds with a short position of Invesco Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Invesco Global.
Diversification Opportunities for American Funds and Invesco Global
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Invesco is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2040 and Invesco Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Global Health and American Funds 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 American Funds 2040 are associated (or correlated) with Invesco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Global Health has no effect on the direction of American Funds i.e., American Funds and Invesco Global go up and down completely randomly.
Pair Corralation between American Funds and Invesco Global
Assuming the 90 days horizon American Funds 2040 is expected to generate 0.63 times more return on investment than Invesco Global. However, American Funds 2040 is 1.59 times less risky than Invesco Global. It trades about 0.04 of its potential returns per unit of risk. Invesco Global Health is currently generating about -0.16 per unit of risk. If you would invest 2,129 in American Funds 2040 on August 29, 2024 and sell it today you would earn a total of 19.00 from holding American Funds 2040 or generate 0.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
American Funds 2040 vs. Invesco Global Health
Performance |
| Timeline |
| American Funds 2040 |
| Invesco Global Health |
American Funds and Invesco Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Invesco Global
The main advantage of trading using opposite American Funds and Invesco Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Invesco Global 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 Global will offset losses from the drop in Invesco Global's long position.| American Funds vs. Alger Health Sciences | American Funds vs. Live Oak Health | American Funds vs. The Gabelli Healthcare | American Funds vs. Baillie Gifford Health |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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