Correlation Between Invesco Senior and VanEck Fallen

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

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

Diversification Opportunities for Invesco Senior and VanEck Fallen

0.25

Correlation Coefficient

Invesco Senior  VanEck Fallen

Modest diversification

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

Pair Corralation between Invesco Senior and VanEck Fallen

Given the investment horizon of 90 days Invesco Senior is expected to generate 17.41 times less return on investment than VanEck Fallen. But when comparing it to its historical volatility, Invesco Senior Loan is 2.27 times less risky than VanEck Fallen. It trades about 0.01 of its potential returns per unit of risk. VanEck Fallen Angel is currently generating about 0.11 of returns per unit of risk over similar time horizon. 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

Invesco Senior Loan  vs.  VanEck Fallen Angel

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.

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.

Pair Trading with Invesco Senior and VanEck Fallen

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

The idea behind Invesco Senior Loan and VanEck Fallen Angel 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.