Correlation Between Emerging Markets and Invesco Global

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

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

Diversification Opportunities for Emerging Markets and Invesco Global

0.52

Correlation Coefficient

Emerging Markets  Invesco Global

Very weak diversification

The 3 months correlation between Emerging and Invesco is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Invesco Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Global Health and Emerging Markets 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 Emerging Markets Fund are associated (or correlated) with Invesco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Global Health has no effect on the direction of Emerging Markets i.e., Emerging Markets and Invesco Global go up and down completely randomly.

Pair Corralation between Emerging Markets and Invesco Global

Assuming the 90 days horizon Emerging Markets is expected to generate 1.14 times less return on investment than Invesco Global. In addition to that, Emerging Markets is 1.2 times more volatile than Invesco Global Health. It trades about 0.03 of its total potential returns per unit of risk. Invesco Global Health is currently generating about 0.04 per unit of volatility. If you would invest  3,707  in Invesco Global Health on September 12, 2024 and sell it today you would earn a total of  382.00  from holding Invesco Global Health or generate 10.3% return on investment over 90 days.

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

Emerging Markets Fund  vs.  Invesco Global Health

Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

Invesco Global Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Global Health has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Emerging Markets and Invesco Global

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

The idea behind Emerging Markets Fund and Invesco Global Health 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.