Correlation Between Agriculture Natural and Invesco Value

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

By analyzing existing cross correlation between Agriculture Natural Solutions and Invesco Value Municipal, you can compare the effects of market volatilities on Agriculture Natural and Invesco Value 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 Agriculture Natural with a short position of Invesco Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agriculture Natural and Invesco Value.

Diversification Opportunities for Agriculture Natural and Invesco Value

0.62

Correlation Coefficient

Agriculture Natural  Invesco Value

Poor diversification

The 3 months correlation between Agriculture and Invesco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Agriculture Natural Solutions and Invesco Value Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Value Municipal and Agriculture Natural 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 Agriculture Natural Solutions are associated (or correlated) with Invesco Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Value Municipal has no effect on the direction of Agriculture Natural i.e., Agriculture Natural and Invesco Value go up and down completely randomly.

Pair Corralation between Agriculture Natural and Invesco Value

Assuming the 90 days horizon Agriculture Natural Solutions is expected to generate 15.95 times more return on investment than Invesco Value. However, Agriculture Natural is 15.95 times more volatile than Invesco Value Municipal. It trades about 0.06 of its potential returns per unit of risk. Invesco Value Municipal is currently generating about 0.09 per unit of risk. If you would invest  27.00  in Agriculture Natural Solutions on December 31, 2024 and sell it today you would earn a total of  3.00  from holding Agriculture Natural Solutions or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.8%
Values	Daily Returns

Agriculture Natural Solutions  vs.  Invesco Value Municipal

Agriculture Natural

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agriculture Natural Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Agriculture Natural showed solid returns over the last few months and may actually be approaching a breakup point.

Invesco Value Municipal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Value Municipal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Invesco Value is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Agriculture Natural and Invesco Value

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

The idea behind Agriculture Natural Solutions and Invesco Value Municipal 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.