Correlation Between Invesco CurrencyShares and Invesco Aaa

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

Diversification Opportunities for Invesco CurrencyShares and Invesco Aaa

0.87

Correlation Coefficient

Invesco CurrencyShares  Invesco Aaa

Very poor diversification

The 3 months correlation between Invesco and Invesco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes and Invesco Aaa Clo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Aaa Clo 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 Aaa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Aaa Clo has no effect on the direction of Invesco CurrencyShares i.e., Invesco CurrencyShares and Invesco Aaa go up and down completely randomly.

Pair Corralation between Invesco CurrencyShares and Invesco Aaa

Considering the 90-day investment horizon Invesco CurrencyShares Japanese is expected to generate 5.24 times more return on investment than Invesco Aaa. However, Invesco CurrencyShares is 5.24 times more volatile than Invesco Aaa Clo. It trades about 0.12 of its potential returns per unit of risk. Invesco Aaa Clo is currently generating about 0.11 per unit of risk. If you would invest  5,881  in Invesco CurrencyShares Japanese on December 29, 2024 and sell it today you would earn a total of  223.00  from holding Invesco CurrencyShares Japanese or generate 3.79% return on investment over 90 days.

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

Invesco CurrencyShares Japanes  vs.  Invesco Aaa Clo

Invesco CurrencyShares

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco CurrencyShares Japanese are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Invesco CurrencyShares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Invesco Aaa Clo

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Aaa Clo are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Invesco Aaa is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco CurrencyShares and Invesco Aaa

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

The idea behind Invesco CurrencyShares Japanese and Invesco Aaa Clo 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.