Correlation Between Invesco CurrencyShares and Invesco QQQ

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

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

Diversification Opportunities for Invesco CurrencyShares and Invesco QQQ

-0.22

Correlation Coefficient

Invesco CurrencyShares  Invesco QQQ

Very good diversification

The 3 months correlation between Invesco and Invesco is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes and Invesco QQQ Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco QQQ Trust and Invesco CurrencyShares 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 CurrencyShares Japanese are associated (or correlated) with Invesco QQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco QQQ Trust has no effect on the direction of Invesco CurrencyShares i.e., Invesco CurrencyShares and Invesco QQQ go up and down completely randomly.

Pair Corralation between Invesco CurrencyShares and Invesco QQQ

Assuming the 90 days trading horizon Invesco CurrencyShares is expected to generate 4.66 times less return on investment than Invesco QQQ. But when comparing it to its historical volatility, Invesco CurrencyShares Japanese is 5.4 times less risky than Invesco QQQ. It trades about 0.31 of its potential returns per unit of risk. Invesco QQQ Trust is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  978,200  in Invesco QQQ Trust on September 5, 2024 and sell it today you would earn a total of  72,192  from holding Invesco QQQ Trust or generate 7.38% return on investment over 90 days.

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

Invesco CurrencyShares Japanes  vs.  Invesco QQQ Trust

Invesco CurrencyShares

Risk-Adjusted Performance

0 of 100

Very Weak

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

Invesco QQQ Trust

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco QQQ Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Invesco QQQ showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco CurrencyShares and Invesco QQQ

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

The idea behind Invesco CurrencyShares Japanese and Invesco QQQ Trust 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.