Correlation Between Blackrock Inflation and Invesco Discovery

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

By analyzing existing cross correlation between Blackrock Inflation Protected and Invesco Discovery, you can compare the effects of market volatilities on Blackrock Inflation and Invesco Discovery 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 Blackrock Inflation with a short position of Invesco Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Inflation and Invesco Discovery.

Diversification Opportunities for Blackrock Inflation and Invesco Discovery

0.23

Correlation Coefficient

Blackrock Inflation  Invesco Discovery

Modest diversification

The 3 months correlation between Blackrock and Invesco is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Inflation Protected and Invesco Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Discovery and Blackrock Inflation 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 Blackrock Inflation Protected are associated (or correlated) with Invesco Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Discovery has no effect on the direction of Blackrock Inflation i.e., Blackrock Inflation and Invesco Discovery go up and down completely randomly.

Pair Corralation between Blackrock Inflation and Invesco Discovery

Assuming the 90 days horizon Blackrock Inflation Protected is expected to generate 0.17 times more return on investment than Invesco Discovery. However, Blackrock Inflation Protected is 5.84 times less risky than Invesco Discovery. It trades about 0.06 of its potential returns per unit of risk. Invesco Discovery is currently generating about -0.19 per unit of risk. If you would invest  977.00  in Blackrock Inflation Protected on November 29, 2024 and sell it today you would earn a total of  9.00  from holding Blackrock Inflation Protected or generate 0.92% return on investment over 90 days.

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

Blackrock Inflation Protected  vs.  Invesco Discovery

Blackrock Inflation

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Inflation Protected are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Blackrock Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Discovery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Discovery has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Blackrock Inflation and Invesco Discovery

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

The idea behind Blackrock Inflation Protected and Invesco Discovery 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.