Correlation Between IQ Healthy and Invesco Aerospace

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

By analyzing existing cross correlation between IQ Healthy Hearts and Invesco Aerospace Defense, you can compare the effects of market volatilities on IQ Healthy and Invesco Aerospace 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 IQ Healthy with a short position of Invesco Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQ Healthy and Invesco Aerospace.

Diversification Opportunities for IQ Healthy and Invesco Aerospace

0.16

Correlation Coefficient

IQ Healthy  Invesco Aerospace

Average diversification

The 3 months correlation between HART and Invesco is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding IQ Healthy Hearts and Invesco Aerospace Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Aerospace Defense and IQ Healthy 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 IQ Healthy Hearts are associated (or correlated) with Invesco Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Aerospace Defense has no effect on the direction of IQ Healthy i.e., IQ Healthy and Invesco Aerospace go up and down completely randomly.

Pair Corralation between IQ Healthy and Invesco Aerospace

Given the investment horizon of 90 days IQ Healthy is expected to generate 1.65 times less return on investment than Invesco Aerospace. But when comparing it to its historical volatility, IQ Healthy Hearts is 1.56 times less risky than Invesco Aerospace. It trades about 0.06 of its potential returns per unit of risk. Invesco Aerospace Defense is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,490  in Invesco Aerospace Defense on December 28, 2024 and sell it today you would earn a total of  403.00  from holding Invesco Aerospace Defense or generate 3.51% return on investment over 90 days.

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

IQ Healthy Hearts  vs.  Invesco Aerospace Defense

IQ Healthy Hearts

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IQ Healthy Hearts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IQ Healthy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco Aerospace Defense

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Aerospace Defense are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Invesco Aerospace is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IQ Healthy and Invesco Aerospace

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

The idea behind IQ Healthy Hearts and Invesco Aerospace Defense 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.