Correlation Between Invesco European and Invesco Gold

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

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

Diversification Opportunities for Invesco European and Invesco Gold

0.81

Correlation Coefficient

Invesco European  Invesco Gold

Very poor diversification

The 3 months correlation between Invesco and Invesco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Invesco European Small and Invesco Gold Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Gold Special and Invesco European 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 European Small are associated (or correlated) with Invesco Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Gold Special has no effect on the direction of Invesco European i.e., Invesco European and Invesco Gold go up and down completely randomly.

Pair Corralation between Invesco European and Invesco Gold

Assuming the 90 days horizon Invesco European Small is expected to under-perform the Invesco Gold. In addition to that, Invesco European is 1.05 times more volatile than Invesco Gold Special. It trades about -0.25 of its total potential returns per unit of risk. Invesco Gold Special is currently generating about -0.17 per unit of volatility. If you would invest  2,866  in Invesco Gold Special on October 5, 2024 and sell it today you would lose (210.00) from holding Invesco Gold Special or give up 7.33% of portfolio value over 90 days.

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

Invesco European Small  vs.  Invesco Gold Special

Invesco European Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco European Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Invesco Gold Special

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Gold Special 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 Invesco European and Invesco Gold

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

The idea behind Invesco European Small and Invesco Gold Special 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..