Correlation Between Invesco CurrencyShares and HCM Defender

Can any of the company-specific risk be diversified away by investing in both Invesco CurrencyShares and HCM Defender 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 HCM Defender 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 HCM Defender 500, you can compare the effects of market volatilities on Invesco CurrencyShares and HCM Defender 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 HCM Defender. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco CurrencyShares and HCM Defender.

Diversification Opportunities for Invesco CurrencyShares and HCM Defender

-0.65

Correlation Coefficient

Invesco CurrencyShares  HCM Defender

Excellent diversification

The 3 months correlation between Invesco and HCM is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes and HCM Defender 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCM Defender 500 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 HCM Defender. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCM Defender 500 has no effect on the direction of Invesco CurrencyShares i.e., Invesco CurrencyShares and HCM Defender go up and down completely randomly.

Pair Corralation between Invesco CurrencyShares and HCM Defender

Considering the 90-day investment horizon Invesco CurrencyShares Japanese is expected to generate 0.45 times more return on investment than HCM Defender. However, Invesco CurrencyShares Japanese is 2.22 times less risky than HCM Defender. It trades about 0.15 of its potential returns per unit of risk. HCM Defender 500 is currently generating about -0.1 per unit of risk. If you would invest  5,846  in Invesco CurrencyShares Japanese on December 27, 2024 and sell it today you would earn a total of  278.00  from holding Invesco CurrencyShares Japanese or generate 4.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Invesco CurrencyShares Japanes  vs.  HCM Defender 500

Invesco CurrencyShares

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco CurrencyShares Japanese are ranked lower than 11 (%) 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.

HCM Defender 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days HCM Defender 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Etf's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with Invesco CurrencyShares and HCM Defender

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

The idea behind Invesco CurrencyShares Japanese and HCM Defender 500 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.