Correlation Between Invesco BulletShares and Invesco Exchange

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

By analyzing existing cross correlation between Invesco BulletShares 2025 and Invesco Exchange Traded Self Indexed, you can compare the effects of market volatilities on Invesco BulletShares and Invesco Exchange 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 BulletShares with a short position of Invesco Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco BulletShares and Invesco Exchange.

Diversification Opportunities for Invesco BulletShares and Invesco Exchange

0.06

Correlation Coefficient

Invesco BulletShares  Invesco Exchange

Significant diversification

The 3 months correlation between Invesco and Invesco is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Invesco BulletShares 2025 and Invesco Exchange Traded Self I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Exchange Traded and Invesco BulletShares 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 BulletShares 2025 are associated (or correlated) with Invesco Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Exchange Traded has no effect on the direction of Invesco BulletShares i.e., Invesco BulletShares and Invesco Exchange go up and down completely randomly.

Pair Corralation between Invesco BulletShares and Invesco Exchange

Given the investment horizon of 90 days Invesco BulletShares is expected to generate 1.12 times less return on investment than Invesco Exchange. But when comparing it to its historical volatility, Invesco BulletShares 2025 is 6.71 times less risky than Invesco Exchange. It trades about 0.4 of its potential returns per unit of risk. Invesco Exchange Traded Self Indexed is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,933  in Invesco Exchange Traded Self Indexed on December 2, 2024 and sell it today you would earn a total of  112.00  from holding Invesco Exchange Traded Self Indexed or generate 5.79% return on investment over 90 days.

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

Invesco BulletShares 2025  vs.  Invesco Exchange Traded Self I

Invesco BulletShares 2025

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco BulletShares 2025 are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Invesco BulletShares is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Invesco Exchange Traded

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Exchange Traded Self Indexed are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Invesco Exchange is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Invesco BulletShares and Invesco Exchange

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

The idea behind Invesco BulletShares 2025 and Invesco Exchange Traded Self Indexed 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.