Correlation Between Invesco Developing and Invesco Technology

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

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

Diversification Opportunities for Invesco Developing and Invesco Technology

-0.57

Correlation Coefficient

Invesco Developing  Invesco Technology

Excellent diversification

The 3 months correlation between Invesco and Invesco is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Developing Markets and Invesco Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Technology and Invesco Developing 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 Developing Markets are associated (or correlated) with Invesco Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Technology has no effect on the direction of Invesco Developing i.e., Invesco Developing and Invesco Technology go up and down completely randomly.

Pair Corralation between Invesco Developing and Invesco Technology

Assuming the 90 days horizon Invesco Developing is expected to generate 5.63 times less return on investment than Invesco Technology. But when comparing it to its historical volatility, Invesco Developing Markets is 1.93 times less risky than Invesco Technology. It trades about 0.11 of its potential returns per unit of risk. Invesco Technology Fund is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  6,736  in Invesco Technology Fund on September 16, 2024 and sell it today you would earn a total of  538.00  from holding Invesco Technology Fund or generate 7.99% return on investment over 90 days.

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

Invesco Developing Markets  vs.  Invesco Technology Fund

Invesco Developing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Invesco Technology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Technology Fund are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Developing and Invesco Technology

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

The idea behind Invesco Developing Markets and Invesco Technology 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.