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 2030 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

0.99

Correlation Coefficient

Invesco BulletShares  Invesco Exchange

No risk reduction

The 3 months correlation between Invesco and Invesco is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Invesco BulletShares 2030 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 2030 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 2030 is expected to generate 0.78 times more return on investment than Invesco Exchange. However, Invesco BulletShares 2030 is 1.28 times less risky than Invesco Exchange. It trades about -0.15 of its potential returns per unit of risk. Invesco Exchange Traded Self Indexed is currently generating about -0.15 per unit of risk. If you would invest  1,683  in Invesco BulletShares 2030 on September 21, 2024 and sell it today you would lose (46.00) from holding Invesco BulletShares 2030 or give up 2.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Invesco BulletShares 2030  vs.  Invesco Exchange Traded Self I

Invesco BulletShares 2030

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco BulletShares 2030 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Invesco BulletShares is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco Exchange Traded

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Exchange Traded Self Indexed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Invesco Exchange is not utilizing all of its potentials. The recent 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 2030 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.