Correlation Between Invesco Technology and Kinetics Internet

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

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

Diversification Opportunities for Invesco Technology and Kinetics Internet

0.93

Correlation Coefficient

Invesco Technology  Kinetics Internet

Almost no diversification

The 3 months correlation between Invesco and Kinetics is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Technology Fund and Kinetics Internet Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Internet and Invesco Technology 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 Technology Fund are associated (or correlated) with Kinetics Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Internet has no effect on the direction of Invesco Technology i.e., Invesco Technology and Kinetics Internet go up and down completely randomly.

Pair Corralation between Invesco Technology and Kinetics Internet

Assuming the 90 days horizon Invesco Technology is expected to generate 2.17 times less return on investment than Kinetics Internet. But when comparing it to its historical volatility, Invesco Technology Fund is 1.57 times less risky than Kinetics Internet. It trades about 0.25 of its potential returns per unit of risk. Kinetics Internet Fund is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  7,705  in Kinetics Internet Fund on September 2, 2024 and sell it today you would earn a total of  3,946  from holding Kinetics Internet Fund or generate 51.21% return on investment over 90 days.

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

Invesco Technology Fund  vs.  Kinetics Internet Fund

Invesco Technology

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Technology Fund are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Invesco Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Kinetics Internet

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Internet Fund are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Kinetics Internet showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Technology and Kinetics Internet

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

The idea behind Invesco Technology Fund and Kinetics Internet Fund 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.