Correlation Between VanEck Fallen and Invesco Senior

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

By analyzing existing cross correlation between VanEck Fallen Angel and Invesco Senior Loan, you can compare the effects of market volatilities on VanEck Fallen and Invesco Senior 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 VanEck Fallen with a short position of Invesco Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Fallen and Invesco Senior.

Diversification Opportunities for VanEck Fallen and Invesco Senior

0.25

Correlation Coefficient

VanEck Fallen  Invesco Senior

Modest diversification

The 3 months correlation between VanEck and Invesco is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Fallen Angel and Invesco Senior Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Senior Loan and VanEck Fallen 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 VanEck Fallen Angel are associated (or correlated) with Invesco Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Senior Loan has no effect on the direction of VanEck Fallen i.e., VanEck Fallen and Invesco Senior go up and down completely randomly.

Pair Corralation between VanEck Fallen and Invesco Senior

Given the investment horizon of 90 days VanEck Fallen Angel is expected to generate 2.27 times more return on investment than Invesco Senior. However, VanEck Fallen is 2.27 times more volatile than Invesco Senior Loan. It trades about 0.11 of its potential returns per unit of risk. Invesco Senior Loan is currently generating about 0.01 per unit of risk. If you would invest  2,833  in VanEck Fallen Angel on December 29, 2024 and sell it today you would earn a total of  51.00  from holding VanEck Fallen Angel or generate 1.8% return on investment over 90 days.

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

VanEck Fallen Angel  vs.  Invesco Senior Loan

VanEck Fallen Angel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Fallen Angel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, VanEck Fallen is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Invesco Senior Loan

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Senior Loan are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Invesco Senior is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with VanEck Fallen and Invesco Senior

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

The idea behind VanEck Fallen Angel and Invesco Senior Loan 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.