Correlation Between Themes Airlines and Invesco Global

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

By analyzing existing cross correlation between Themes Airlines ETF and Invesco Global Listed, you can compare the effects of market volatilities on Themes Airlines 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 Themes Airlines with a short position of Invesco Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Themes Airlines and Invesco Global.

Diversification Opportunities for Themes Airlines and Invesco Global

0.84

Correlation Coefficient

Themes Airlines  Invesco Global

Very poor diversification

The 3 months correlation between Themes and Invesco is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Themes Airlines ETF and Invesco Global Listed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Global Listed and Themes Airlines 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 Themes Airlines ETF 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 Listed has no effect on the direction of Themes Airlines i.e., Themes Airlines and Invesco Global go up and down completely randomly.

Pair Corralation between Themes Airlines and Invesco Global

Given the investment horizon of 90 days Themes Airlines is expected to generate 1.2 times less return on investment than Invesco Global. In addition to that, Themes Airlines is 1.05 times more volatile than Invesco Global Listed. It trades about 0.07 of its total potential returns per unit of risk. Invesco Global Listed is currently generating about 0.09 per unit of volatility. If you would invest  4,218  in Invesco Global Listed on September 13, 2024 and sell it today you would earn a total of  2,863  from holding Invesco Global Listed or generate 67.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	51.62%
Values	Daily Returns

Themes Airlines ETF  vs.  Invesco Global Listed

Themes Airlines ETF

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Airlines ETF are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Themes Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

Invesco Global Listed

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Global Listed are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Invesco Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Themes Airlines and Invesco Global

The main advantage of trading using opposite Themes Airlines and Invesco Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Themes Airlines 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.

The idea behind Themes Airlines ETF and Invesco Global Listed 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 Global Correlations module to find global opportunities by holding instruments from different markets.