Correlation Between Quantitative and Invesco American

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

By analyzing existing cross correlation between Quantitative Longshort Equity and Invesco American Franchise, you can compare the effects of market volatilities on Quantitative and Invesco American 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 Quantitative with a short position of Invesco American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quantitative and Invesco American.

Diversification Opportunities for Quantitative and Invesco American

0.56

Correlation Coefficient

Quantitative  Invesco American

Very weak diversification

The 3 months correlation between Quantitative and Invesco is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Quantitative Longshort Equity and Invesco American Franchise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco American Fra and Quantitative 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 Quantitative Longshort Equity are associated (or correlated) with Invesco American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco American Fra has no effect on the direction of Quantitative i.e., Quantitative and Invesco American go up and down completely randomly.

Pair Corralation between Quantitative and Invesco American

Assuming the 90 days horizon Quantitative is expected to generate 6.32 times less return on investment than Invesco American. But when comparing it to its historical volatility, Quantitative Longshort Equity is 2.21 times less risky than Invesco American. It trades about 0.04 of its potential returns per unit of risk. Invesco American Franchise is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,681  in Invesco American Franchise on October 4, 2024 and sell it today you would earn a total of  1,262  from holding Invesco American Franchise or generate 75.07% return on investment over 90 days.

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

Quantitative Longshort Equity  vs.  Invesco American Franchise

Quantitative Longshort

Risk-Adjusted Performance

0 of 100

Very Weak

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

Invesco American Fra

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco American Franchise are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Invesco American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Quantitative and Invesco American

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

The idea behind Quantitative Longshort Equity and Invesco American Franchise 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.