Correlation Between Invesco AT1 and Invesco Treasury

Can any of the company-specific risk be diversified away by investing in both Invesco AT1 and Invesco Treasury 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 AT1 and Invesco Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco AT1 Capital and Invesco Treasury Bond, you can compare the effects of market volatilities on Invesco AT1 and Invesco Treasury 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 AT1 with a short position of Invesco Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco AT1 and Invesco Treasury.

Diversification Opportunities for Invesco AT1 and Invesco Treasury

0.83

Correlation Coefficient

Invesco AT1  Invesco Treasury

Very poor diversification

The 3 months correlation between Invesco and Invesco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Invesco AT1 Capital and Invesco Treasury Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Treasury Bond and Invesco AT1 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 AT1 Capital are associated (or correlated) with Invesco Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Treasury Bond has no effect on the direction of Invesco AT1 i.e., Invesco AT1 and Invesco Treasury go up and down completely randomly.

Pair Corralation between Invesco AT1 and Invesco Treasury

Assuming the 90 days trading horizon Invesco AT1 is expected to generate 1.62 times less return on investment than Invesco Treasury. But when comparing it to its historical volatility, Invesco AT1 Capital is 3.1 times less risky than Invesco Treasury. It trades about 0.13 of its potential returns per unit of risk. Invesco Treasury Bond is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,520  in Invesco Treasury Bond on December 24, 2024 and sell it today you would earn a total of  95.00  from holding Invesco Treasury Bond or generate 2.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Invesco AT1 Capital  vs.  Invesco Treasury Bond

Invesco AT1 Capital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco AT1 Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Invesco AT1 is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Invesco Treasury Bond

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Treasury Bond are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Invesco Treasury is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Invesco AT1 and Invesco Treasury

The main advantage of trading using opposite Invesco AT1 and Invesco Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco AT1 position performs unexpectedly, Invesco Treasury 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 Treasury will offset losses from the drop in Invesco Treasury's long position.

The idea behind Invesco AT1 Capital and Invesco Treasury Bond 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 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.