Correlation Between Invesco China and CHIE

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

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

Diversification Opportunities for Invesco China and CHIE

0.0

Correlation Coefficient

Invesco China  CHIE

Pay attention - limited upside

The 3 months correlation between Invesco and CHIE is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Invesco China Technology and CHIE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHIE and Invesco China 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 China Technology are associated (or correlated) with CHIE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHIE has no effect on the direction of Invesco China i.e., Invesco China and CHIE go up and down completely randomly.

Pair Corralation between Invesco China and CHIE

If you would invest  4,066  in Invesco China Technology on December 27, 2024 and sell it today you would earn a total of  524.00  from holding Invesco China Technology or generate 12.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Invesco China Technology  vs.  CHIE

Invesco China Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco China Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Invesco China reported solid returns over the last few months and may actually be approaching a breakup point.

CHIE

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHIE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, CHIE is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco China and CHIE

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

The idea behind Invesco China Technology and CHIE 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.