Correlation Between Invesco SP and AdvisorShares Dorsey

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

By analyzing existing cross correlation between Invesco SP International and AdvisorShares Dorsey Wright, you can compare the effects of market volatilities on Invesco SP and AdvisorShares Dorsey 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 SP with a short position of AdvisorShares Dorsey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and AdvisorShares Dorsey.

Diversification Opportunities for Invesco SP and AdvisorShares Dorsey

0.75

Correlation Coefficient

Invesco SP  AdvisorShares Dorsey

Poor diversification

The 3 months correlation between Invesco and AdvisorShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP International and AdvisorShares Dorsey Wright in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Dorsey and Invesco SP 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 SP International are associated (or correlated) with AdvisorShares Dorsey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Dorsey has no effect on the direction of Invesco SP i.e., Invesco SP and AdvisorShares Dorsey go up and down completely randomly.

Pair Corralation between Invesco SP and AdvisorShares Dorsey

Given the investment horizon of 90 days Invesco SP is expected to generate 4.63 times less return on investment than AdvisorShares Dorsey. But when comparing it to its historical volatility, Invesco SP International is 1.36 times less risky than AdvisorShares Dorsey. It trades about 0.02 of its potential returns per unit of risk. AdvisorShares Dorsey Wright is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,133  in AdvisorShares Dorsey Wright on December 5, 2024 and sell it today you would earn a total of  1,298  from holding AdvisorShares Dorsey Wright or generate 21.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.56%
Values	Daily Returns

Invesco SP International  vs.  AdvisorShares Dorsey Wright

Invesco SP International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, Invesco SP is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

AdvisorShares Dorsey

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Dorsey Wright are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, AdvisorShares Dorsey may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Invesco SP and AdvisorShares Dorsey

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

The idea behind Invesco SP International and AdvisorShares Dorsey Wright 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.