Correlation Between Invesco Balanced and Absolute Capital

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

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

Diversification Opportunities for Invesco Balanced and Absolute Capital

-0.28

Correlation Coefficient

Invesco Balanced  Absolute Capital

Very good diversification

The 3 months correlation between Invesco and Absolute is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Balanced Risk Allocati and Absolute Capital Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Asset and Invesco Balanced 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 Balanced Risk Allocation are associated (or correlated) with Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Asset has no effect on the direction of Invesco Balanced i.e., Invesco Balanced and Absolute Capital go up and down completely randomly.

Pair Corralation between Invesco Balanced and Absolute Capital

Assuming the 90 days horizon Invesco Balanced Risk Allocation is expected to under-perform the Absolute Capital. In addition to that, Invesco Balanced is 2.49 times more volatile than Absolute Capital Asset. It trades about -0.17 of its total potential returns per unit of risk. Absolute Capital Asset is currently generating about 0.04 per unit of volatility. If you would invest  1,090  in Absolute Capital Asset on September 21, 2024 and sell it today you would earn a total of  18.00  from holding Absolute Capital Asset or generate 1.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Invesco Balanced Risk Allocati  vs.  Absolute Capital Asset

Invesco Balanced Risk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Balanced Risk Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Absolute Capital Asset

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Capital Asset are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Absolute Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco Balanced and Absolute Capital

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

The idea behind Invesco Balanced Risk Allocation and Absolute Capital Asset 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.