Correlation Between Absolute Capital and Invesco Technology

Can any of the company-specific risk be diversified away by investing in both Absolute Capital and Invesco Technology 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 Absolute Capital and Invesco Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Absolute Capital Asset and Invesco Technology Fund, you can compare the effects of market volatilities on Absolute Capital and Invesco Technology 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 Absolute Capital with a short position of Invesco Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Capital and Invesco Technology.

Diversification Opportunities for Absolute Capital and Invesco Technology

0.91

Correlation Coefficient

Absolute Capital  Invesco Technology

Almost no diversification

The 3 months correlation between Absolute and Invesco is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Capital Asset and Invesco Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Technology and Absolute Capital 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 Absolute Capital Asset are associated (or correlated) with Invesco Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Technology has no effect on the direction of Absolute Capital i.e., Absolute Capital and Invesco Technology go up and down completely randomly.

Pair Corralation between Absolute Capital and Invesco Technology

Assuming the 90 days horizon Absolute Capital Asset is expected to generate 0.25 times more return on investment than Invesco Technology. However, Absolute Capital Asset is 4.01 times less risky than Invesco Technology. It trades about -0.1 of its potential returns per unit of risk. Invesco Technology Fund is currently generating about -0.18 per unit of risk. If you would invest  1,212  in Absolute Capital Asset on September 22, 2024 and sell it today you would lose (17.00) from holding Absolute Capital Asset or give up 1.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Absolute Capital Asset  vs.  Invesco Technology Fund

Absolute Capital Asset

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Capital Asset are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Absolute Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Technology

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Technology Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Invesco Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Absolute Capital and Invesco Technology

The main advantage of trading using opposite Absolute Capital and Invesco Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Capital position performs unexpectedly, Invesco Technology 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 Technology will offset losses from the drop in Invesco Technology's long position.

The idea behind Absolute Capital Asset and Invesco Technology Fund 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.