Correlation Between Eaton Vance and Invesco Water

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

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

Diversification Opportunities for Eaton Vance and Invesco Water

-0.48

Correlation Coefficient

Eaton Vance  Invesco Water

Very good diversification

The 3 months correlation between Eaton and Invesco is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Enhanced and Invesco Water Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Water Resources and Eaton Vance 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 Eaton Vance Enhanced are associated (or correlated) with Invesco Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Water Resources has no effect on the direction of Eaton Vance i.e., Eaton Vance and Invesco Water go up and down completely randomly.

Pair Corralation between Eaton Vance and Invesco Water

Considering the 90-day investment horizon Eaton Vance Enhanced is expected to under-perform the Invesco Water. In addition to that, Eaton Vance is 1.4 times more volatile than Invesco Water Resources. It trades about -0.03 of its total potential returns per unit of risk. Invesco Water Resources is currently generating about 0.19 per unit of volatility. If you would invest  6,629  in Invesco Water Resources on October 24, 2024 and sell it today you would earn a total of  212.50  from holding Invesco Water Resources or generate 3.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Eaton Vance Enhanced  vs.  Invesco Water Resources

Eaton Vance Enhanced

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Enhanced are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Eaton Vance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Invesco Water Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Water Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Invesco Water is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eaton Vance and Invesco Water

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

The idea behind Eaton Vance Enhanced and Invesco Water Resources 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.