Correlation Between Invesco Convertible and Northern

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

By analyzing existing cross correlation between Invesco Vertible Securities and Northern Government Fund, you can compare the effects of market volatilities on Invesco Convertible and Northern 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 Convertible with a short position of Northern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Convertible and Northern.

Diversification Opportunities for Invesco Convertible and Northern

-0.13

Correlation Coefficient

Invesco Convertible  Northern

Good diversification

The 3 months correlation between Invesco and Northern is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Vertible Securities and Northern Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Government and Invesco Convertible 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 Vertible Securities are associated (or correlated) with Northern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Government has no effect on the direction of Invesco Convertible i.e., Invesco Convertible and Northern go up and down completely randomly.

Pair Corralation between Invesco Convertible and Northern

Assuming the 90 days horizon Invesco Vertible Securities is expected to generate 2.03 times more return on investment than Northern. However, Invesco Convertible is 2.03 times more volatile than Northern Government Fund. It trades about 0.03 of its potential returns per unit of risk. Northern Government Fund is currently generating about -0.1 per unit of risk. If you would invest  2,380  in Invesco Vertible Securities on October 11, 2024 and sell it today you would earn a total of  21.00  from holding Invesco Vertible Securities or generate 0.88% return on investment over 90 days.

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

Invesco Vertible Securities  vs.  Northern Government Fund

Invesco Vertible Sec

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Vertible Securities are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Invesco Convertible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Northern Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Government Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Northern 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 Convertible and Northern

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

The idea behind Invesco Vertible Securities and Northern Government 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.