Correlation Between Xtrackers Harvest and Invesco China

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

By analyzing existing cross correlation between Xtrackers Harvest CSI and Invesco China Technology, you can compare the effects of market volatilities on Xtrackers Harvest and Invesco China 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 Xtrackers Harvest with a short position of Invesco China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Harvest and Invesco China.

Diversification Opportunities for Xtrackers Harvest and Invesco China

0.45

Correlation Coefficient

Xtrackers Harvest  Invesco China

Very weak diversification

The 3 months correlation between Xtrackers and Invesco is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Harvest CSI and Invesco China Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco China Technology and Xtrackers Harvest 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 Xtrackers Harvest CSI are associated (or correlated) with Invesco China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco China Technology has no effect on the direction of Xtrackers Harvest i.e., Xtrackers Harvest and Invesco China go up and down completely randomly.

Pair Corralation between Xtrackers Harvest and Invesco China

Given the investment horizon of 90 days Xtrackers Harvest is expected to generate 20.01 times less return on investment than Invesco China. But when comparing it to its historical volatility, Xtrackers Harvest CSI is 1.39 times less risky than Invesco China. It trades about 0.01 of its potential returns per unit of risk. Invesco China Technology is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,046  in Invesco China Technology on November 28, 2024 and sell it today you would earn a total of  725.00  from holding Invesco China Technology or generate 17.92% return on investment over 90 days.

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

Xtrackers Harvest CSI  vs.  Invesco China Technology

Xtrackers Harvest CSI

Risk-Adjusted Performance

Weak

Over the last 90 days Xtrackers Harvest CSI has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Xtrackers Harvest is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Invesco China Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco China Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Invesco China reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers Harvest and Invesco China

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

The idea behind Xtrackers Harvest CSI and Invesco China Technology 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.