Correlation Between Invesco Small and Government Securities
Can any of the company-specific risk be diversified away by investing in both Invesco Small and Government Securities 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 Small and Government Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Small Cap and Government Securities Fund, you can compare the effects of market volatilities on Invesco Small and Government Securities 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 Small with a short position of Government Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Small and Government Securities.
Diversification Opportunities for Invesco Small and Government Securities
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Invesco and Government is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Small Cap and Government Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Securities and Invesco Small 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 Small Cap are associated (or correlated) with Government Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Securities has no effect on the direction of Invesco Small i.e., Invesco Small and Government Securities go up and down completely randomly.
Pair Corralation between Invesco Small and Government Securities
Assuming the 90 days horizon Invesco Small Cap is expected to generate 5.58 times more return on investment than Government Securities. However, Invesco Small is 5.58 times more volatile than Government Securities Fund. It trades about 0.32 of its potential returns per unit of risk. Government Securities Fund is currently generating about 0.12 per unit of risk. If you would invest 1,649 in Invesco Small Cap on September 4, 2024 and sell it today you would earn a total of 187.00 from holding Invesco Small Cap or generate 11.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Invesco Small Cap vs. Government Securities Fund
Performance |
| Timeline |
| Invesco Small Cap |
| Government Securities |
Invesco Small and Government Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Small and Government Securities
The main advantage of trading using opposite Invesco Small and Government Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Small position performs unexpectedly, Government Securities 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 Government Securities will offset losses from the drop in Government Securities' long position.| Invesco Small vs. Qs Large Cap | Invesco Small vs. Transamerica Large Cap | Invesco Small vs. Dunham Large Cap | Invesco Small vs. Dodge Cox Stock |
| Government Securities vs. T Rowe Price | Government Securities vs. Versatile Bond Portfolio | Government Securities vs. Multisector Bond Sma | Government Securities vs. Gmo 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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