Correlation Between AdvisorShares Hotel and Invesco Dynamic

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

By analyzing existing cross correlation between AdvisorShares Hotel ETF and Invesco Dynamic Building, you can compare the effects of market volatilities on AdvisorShares Hotel and Invesco Dynamic 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 AdvisorShares Hotel with a short position of Invesco Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of AdvisorShares Hotel and Invesco Dynamic.

Diversification Opportunities for AdvisorShares Hotel and Invesco Dynamic

0.82

Correlation Coefficient

AdvisorShares Hotel  Invesco Dynamic

Very poor diversification

The 3 months correlation between AdvisorShares and Invesco is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding AdvisorShares Hotel ETF and Invesco Dynamic Building in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Building and AdvisorShares Hotel 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 AdvisorShares Hotel ETF are associated (or correlated) with Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Building has no effect on the direction of AdvisorShares Hotel i.e., AdvisorShares Hotel and Invesco Dynamic go up and down completely randomly.

Pair Corralation between AdvisorShares Hotel and Invesco Dynamic

Given the investment horizon of 90 days AdvisorShares Hotel ETF is expected to generate 0.56 times more return on investment than Invesco Dynamic. However, AdvisorShares Hotel ETF is 1.78 times less risky than Invesco Dynamic. It trades about 0.36 of its potential returns per unit of risk. Invesco Dynamic Building is currently generating about -0.15 per unit of risk. If you would invest  3,243  in AdvisorShares Hotel ETF on September 19, 2024 and sell it today you would earn a total of  167.80  from holding AdvisorShares Hotel ETF or generate 5.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

AdvisorShares Hotel ETF  vs.  Invesco Dynamic Building

AdvisorShares Hotel ETF

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Hotel ETF are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, AdvisorShares Hotel showed solid returns over the last few months and may actually be approaching a breakup point.

Invesco Dynamic Building

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Building are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Invesco Dynamic is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AdvisorShares Hotel and Invesco Dynamic

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

The idea behind AdvisorShares Hotel ETF and Invesco Dynamic Building 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 Anywhere module to track or share privately all of your investments from the convenience of any device.