Correlation Between Invesco Balanced and California Bond

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

By analyzing existing cross correlation between Invesco Balanced Risk Modity and California Bond Fund, you can compare the effects of market volatilities on Invesco Balanced and California Bond 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 Balanced with a short position of California Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Balanced and California Bond.

Diversification Opportunities for Invesco Balanced and California Bond

0.4

Correlation Coefficient

Invesco Balanced  California Bond

Very weak diversification

The 3 months correlation between Invesco and California is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Balanced Risk Modity and California Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Bond and Invesco Balanced 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 Balanced Risk Modity are associated (or correlated) with California Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Bond has no effect on the direction of Invesco Balanced i.e., Invesco Balanced and California Bond go up and down completely randomly.

Pair Corralation between Invesco Balanced and California Bond

Assuming the 90 days horizon Invesco Balanced Risk Modity is expected to under-perform the California Bond. In addition to that, Invesco Balanced is 4.11 times more volatile than California Bond Fund. It trades about -0.18 of its total potential returns per unit of risk. California Bond Fund is currently generating about -0.33 per unit of volatility. If you would invest  1,054  in California Bond Fund on October 6, 2024 and sell it today you would lose (19.00) from holding California Bond Fund or give up 1.8% of portfolio value over 90 days.

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

Invesco Balanced Risk Modity  vs.  California Bond Fund

Invesco Balanced Risk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Balanced Risk Modity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

California Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, California Bond 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 Balanced and California Bond

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

The idea behind Invesco Balanced Risk Modity and California Bond Fund 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.