Correlation Between Invesco Global and Vanguard Growth

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

Diversification Opportunities for Invesco Global and Vanguard Growth

-0.65

Correlation Coefficient

Invesco Global  Vanguard Growth

Excellent diversification

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

Pair Corralation between Invesco Global and Vanguard Growth

Assuming the 90 days horizon Invesco Global Health is expected to under-perform the Vanguard Growth. In addition to that, Invesco Global is 1.87 times more volatile than Vanguard Growth Index. It trades about -0.3 of its total potential returns per unit of risk. Vanguard Growth Index is currently generating about 0.02 per unit of volatility. If you would invest  21,632  in Vanguard Growth Index on October 9, 2024 and sell it today you would earn a total of  49.00  from holding Vanguard Growth Index or generate 0.23% return on investment over 90 days.

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

Invesco Global Health  vs.  Vanguard Growth Index

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 weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Vanguard Growth Index

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Invesco Global and Vanguard Growth

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

The idea behind Invesco Global Health and Vanguard Growth Index 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.