Correlation Between Materials Select and Invesco Global
Can any of the company-specific risk be diversified away by investing in both Materials Select 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 Materials Select and Invesco Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Materials Select Sector and Invesco Global Water, you can compare the effects of market volatilities on Materials Select 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 Materials Select with a short position of Invesco Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Select and Invesco Global.
Diversification Opportunities for Materials Select and Invesco Global
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Materials and Invesco is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Materials Select Sector and Invesco Global Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Global Water and Materials Select 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 Materials Select Sector 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 Water has no effect on the direction of Materials Select i.e., Materials Select and Invesco Global go up and down completely randomly.
Pair Corralation between Materials Select and Invesco Global
Considering the 90-day investment horizon Materials Select Sector is expected to under-perform the Invesco Global. In addition to that, Materials Select is 1.23 times more volatile than Invesco Global Water. It trades about -0.14 of its total potential returns per unit of risk. Invesco Global Water is currently generating about -0.06 per unit of volatility. If you would invest 4,130 in Invesco Global Water on October 22, 2024 and sell it today you would lose (108.00) from holding Invesco Global Water or give up 2.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Materials Select Sector vs. Invesco Global Water
Performance |
| Timeline |
| Materials Select Sector |
| Invesco Global Water |
Materials Select and Invesco Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Materials Select and Invesco Global
The main advantage of trading using opposite Materials Select and Invesco Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Select 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.| Materials Select vs. Industrial Select Sector | Materials Select vs. Consumer Discretionary Select | Materials Select vs. Consumer Staples Select | Materials Select vs. Utilities Select Sector |
| Invesco Global vs. Invesco SP Global | Invesco Global vs. Invesco Water Resources | Invesco Global vs. First Trust Water | Invesco Global vs. Invesco Global Clean |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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