Correlation Between Invesco Stock and Optimum Small-mid

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

By analyzing existing cross correlation between Invesco Stock Fund and Optimum Small Mid Cap, you can compare the effects of market volatilities on Invesco Stock and Optimum Small-mid 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 Stock with a short position of Optimum Small-mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Stock and Optimum Small-mid.

Diversification Opportunities for Invesco Stock and Optimum Small-mid

0.48

Correlation Coefficient

Invesco Stock  Optimum Small-mid

Very weak diversification

The 3 months correlation between Invesco and Optimum is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Stock Fund and Optimum Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimum Small Mid and Invesco Stock 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 Stock Fund are associated (or correlated) with Optimum Small-mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimum Small Mid has no effect on the direction of Invesco Stock i.e., Invesco Stock and Optimum Small-mid go up and down completely randomly.

Pair Corralation between Invesco Stock and Optimum Small-mid

Assuming the 90 days horizon Invesco Stock Fund is expected to generate 0.77 times more return on investment than Optimum Small-mid. However, Invesco Stock Fund is 1.3 times less risky than Optimum Small-mid. It trades about 0.07 of its potential returns per unit of risk. Optimum Small Mid Cap is currently generating about -0.09 per unit of risk. If you would invest  2,870  in Invesco Stock Fund on December 21, 2024 and sell it today you would earn a total of  83.00  from holding Invesco Stock Fund or generate 2.89% return on investment over 90 days.

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

Invesco Stock Fund  vs.  Optimum Small Mid Cap

Invesco Stock

Risk-Adjusted Performance

Modest

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

Optimum Small Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optimum Small Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Optimum Small-mid 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 Stock and Optimum Small-mid

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

The idea behind Invesco Stock Fund and Optimum Small Mid Cap 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.