Correlation Between Invesco Real and Frost Total

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

By analyzing existing cross correlation between Invesco Real Estate and Frost Total Return, you can compare the effects of market volatilities on Invesco Real and Frost Total 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 Real with a short position of Frost Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Real and Frost Total.

Diversification Opportunities for Invesco Real and Frost Total

0.68

Correlation Coefficient

Invesco Real  Frost Total

Poor diversification

The 3 months correlation between Invesco and Frost is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Real Estate and Frost Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frost Total Return and Invesco Real 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 Real Estate are associated (or correlated) with Frost Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frost Total Return has no effect on the direction of Invesco Real i.e., Invesco Real and Frost Total go up and down completely randomly.

Pair Corralation between Invesco Real and Frost Total

Assuming the 90 days horizon Invesco Real Estate is expected to under-perform the Frost Total. In addition to that, Invesco Real is 3.82 times more volatile than Frost Total Return. It trades about -0.12 of its total potential returns per unit of risk. Frost Total Return is currently generating about -0.16 per unit of volatility. If you would invest  1,002  in Frost Total Return on September 17, 2024 and sell it today you would lose (24.00) from holding Frost Total Return or give up 2.4% of portfolio value over 90 days.

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

Invesco Real Estate  vs.  Frost Total Return

Invesco Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Frost Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frost Total Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Frost Total 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 Real and Frost Total

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

The idea behind Invesco Real Estate and Frost Total Return 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 Global Correlations module to find global opportunities by holding instruments from different markets.