Correlation Between Invesco Balanced-risk and Kensington Active

Can any of the company-specific risk be diversified away by investing in both Invesco Balanced-risk and Kensington Active 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-risk and Kensington Active 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 Kensington Active Advantage, you can compare the effects of market volatilities on Invesco Balanced-risk and Kensington Active 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-risk with a short position of Kensington Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Balanced-risk and Kensington Active.

Diversification Opportunities for Invesco Balanced-risk and Kensington Active

-0.38

Correlation Coefficient

Invesco Balanced-risk  Kensington Active

Very good diversification

The 3 months correlation between Invesco and Kensington is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Balanced Risk Allocati and Kensington Active Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Active and Invesco Balanced-risk 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 Kensington Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Active has no effect on the direction of Invesco Balanced-risk i.e., Invesco Balanced-risk and Kensington Active go up and down completely randomly.

Pair Corralation between Invesco Balanced-risk and Kensington Active

Assuming the 90 days horizon Invesco Balanced Risk Allocation is expected to under-perform the Kensington Active. In addition to that, Invesco Balanced-risk is 2.32 times more volatile than Kensington Active Advantage. It trades about -0.1 of its total potential returns per unit of risk. Kensington Active Advantage is currently generating about 0.02 per unit of volatility. If you would invest  993.00  in Kensington Active Advantage on October 2, 2024 and sell it today you would earn a total of  10.00  from holding Kensington Active Advantage or generate 1.01% 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.  Kensington Active Advantage

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.

Kensington Active

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kensington Active Advantage are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Kensington Active 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-risk and Kensington Active

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

The idea behind Invesco Balanced Risk Allocation and Kensington Active Advantage 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.