Correlation Between Invesco High and Small Capitalization

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

By analyzing existing cross correlation between Invesco High Yield and Small Capitalization Portfolio, you can compare the effects of market volatilities on Invesco High and Small Capitalization 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 High with a short position of Small Capitalization. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco High and Small Capitalization.

Diversification Opportunities for Invesco High and Small Capitalization

-0.06

Correlation Coefficient

Invesco High  Small Capitalization

Good diversification

The 3 months correlation between Invesco and Small is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Invesco High Yield and Small Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Capitalization and Invesco High 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 High Yield are associated (or correlated) with Small Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Capitalization has no effect on the direction of Invesco High i.e., Invesco High and Small Capitalization go up and down completely randomly.

Pair Corralation between Invesco High and Small Capitalization

Assuming the 90 days horizon Invesco High Yield is expected to generate 0.02 times more return on investment than Small Capitalization. However, Invesco High Yield is 49.4 times less risky than Small Capitalization. It trades about 0.16 of its potential returns per unit of risk. Small Capitalization Portfolio is currently generating about -0.11 per unit of risk. If you would invest  354.00  in Invesco High Yield on September 13, 2024 and sell it today you would earn a total of  6.00  from holding Invesco High Yield or generate 1.69% return on investment over 90 days.

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

Invesco High Yield  vs.  Small Capitalization Portfolio

Invesco High Yield

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco High Yield are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Invesco High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Capitalization

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Capitalization Portfolio 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 fundamental 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.

Pair Trading with Invesco High and Small Capitalization

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

The idea behind Invesco High Yield and Small Capitalization Portfolio 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.