Correlation Between Eic Value and Invesco Small

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

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

Diversification Opportunities for Eic Value and Invesco Small

-0.32

Correlation Coefficient

Eic Value  Invesco Small

Very good diversification

The 3 months correlation between Eic and Invesco is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Eic Value Fund and Invesco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Small Cap and Eic Value 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 Eic Value Fund are associated (or correlated) with Invesco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Small Cap has no effect on the direction of Eic Value i.e., Eic Value and Invesco Small go up and down completely randomly.

Pair Corralation between Eic Value and Invesco Small

Assuming the 90 days horizon Eic Value Fund is expected to generate 0.5 times more return on investment than Invesco Small. However, Eic Value Fund is 2.01 times less risky than Invesco Small. It trades about 0.19 of its potential returns per unit of risk. Invesco Small Cap is currently generating about -0.06 per unit of risk. If you would invest  1,675  in Eic Value Fund on December 28, 2024 and sell it today you would earn a total of  130.00  from holding Eic Value Fund or generate 7.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Eic Value Fund  vs.  Invesco Small Cap

Eic Value Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eic Value Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Eic Value may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Invesco Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Invesco Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eic Value and Invesco Small

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

The idea behind Eic Value Fund and Invesco Small Cap 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.