Correlation Between Invesco Disciplined and Matthews Pacific

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

By analyzing existing cross correlation between Invesco Disciplined Equity and Matthews Pacific Tiger, you can compare the effects of market volatilities on Invesco Disciplined and Matthews Pacific 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 Disciplined with a short position of Matthews Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Disciplined and Matthews Pacific.

Diversification Opportunities for Invesco Disciplined and Matthews Pacific

-0.08

Correlation Coefficient

Invesco Disciplined  Matthews Pacific

Good diversification

The 3 months correlation between Invesco and Matthews is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Disciplined Equity and Matthews Pacific Tiger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Pacific Tiger and Invesco Disciplined 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 Disciplined Equity are associated (or correlated) with Matthews Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Pacific Tiger has no effect on the direction of Invesco Disciplined i.e., Invesco Disciplined and Matthews Pacific go up and down completely randomly.

Pair Corralation between Invesco Disciplined and Matthews Pacific

Assuming the 90 days horizon Invesco Disciplined Equity is expected to under-perform the Matthews Pacific. But the mutual fund apears to be less risky and, when comparing its historical volatility, Invesco Disciplined Equity is 1.31 times less risky than Matthews Pacific. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Matthews Pacific Tiger is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,771  in Matthews Pacific Tiger on December 30, 2024 and sell it today you would earn a total of  1.00  from holding Matthews Pacific Tiger or generate 0.06% return on investment over 90 days.

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

Invesco Disciplined Equity  vs.  Matthews Pacific Tiger

Invesco Disciplined

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Disciplined Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Invesco Disciplined is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Matthews Pacific Tiger

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matthews Pacific Tiger has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Matthews Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco Disciplined and Matthews Pacific

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

The idea behind Invesco Disciplined Equity and Matthews Pacific Tiger 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.