Correlation Between Invesco European and Deutsche Gold

Can any of the company-specific risk be diversified away by investing in both Invesco European and Deutsche 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 Deutsche 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 Deutsche Gold Precious, you can compare the effects of market volatilities on Invesco European and Deutsche 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 Deutsche Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco European and Deutsche Gold.

Diversification Opportunities for Invesco European and Deutsche Gold

0.78

Correlation Coefficient

Invesco European  Deutsche Gold

Poor diversification

The 3 months correlation between Invesco and Deutsche is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Invesco European Small and Deutsche Gold Precious in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Gold Precious 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 Deutsche Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Gold Precious has no effect on the direction of Invesco European i.e., Invesco European and Deutsche Gold go up and down completely randomly.

Pair Corralation between Invesco European and Deutsche Gold

Assuming the 90 days horizon Invesco European is expected to generate 3.15 times less return on investment than Deutsche Gold. But when comparing it to its historical volatility, Invesco European Small is 2.04 times less risky than Deutsche Gold. It trades about 0.02 of its potential returns per unit of risk. Deutsche Gold Precious is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,531  in Deutsche Gold Precious on October 21, 2024 and sell it today you would earn a total of  997.00  from holding Deutsche Gold Precious or generate 22.0% return on investment over 90 days.

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

Invesco European Small  vs.  Deutsche Gold Precious

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 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.

Deutsche Gold Precious

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Gold Precious has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Deutsche Gold

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

The idea behind Invesco European Small and Deutsche Gold Precious 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.

Check out your portfolio center.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.