Correlation Between Invesco Global and Virtus Kar

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

By analyzing existing cross correlation between Invesco Global Health and Virtus Kar Mid Cap, you can compare the effects of market volatilities on Invesco Global and Virtus Kar 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 Global with a short position of Virtus Kar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Global and Virtus Kar.

Diversification Opportunities for Invesco Global and Virtus Kar

0.36

Correlation Coefficient

Invesco Global  Virtus Kar

Weak diversification

The 3 months correlation between Invesco and Virtus is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Global Health and Virtus Kar Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Kar Mid and Invesco Global 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 Global Health are associated (or correlated) with Virtus Kar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Kar Mid has no effect on the direction of Invesco Global i.e., Invesco Global and Virtus Kar go up and down completely randomly.

Pair Corralation between Invesco Global and Virtus Kar

Assuming the 90 days horizon Invesco Global Health is expected to generate 0.89 times more return on investment than Virtus Kar. However, Invesco Global Health is 1.12 times less risky than Virtus Kar. It trades about 0.26 of its potential returns per unit of risk. Virtus Kar Mid Cap is currently generating about 0.2 per unit of risk. If you would invest  1,732  in Invesco Global Health on October 24, 2024 and sell it today you would earn a total of  70.00  from holding Invesco Global Health or generate 4.04% return on investment over 90 days.

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

Invesco Global Health  vs.  Virtus Kar Mid Cap

Invesco Global Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Global Health has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Virtus Kar Mid

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Kar Mid Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Virtus Kar is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco Global and Virtus Kar

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

The idea behind Invesco Global Health and Virtus Kar Mid Cap 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.