Correlation Between Invesco Energy and Allianzgi Small-cap

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

By analyzing existing cross correlation between Invesco Energy Fund and Allianzgi Small Cap Fund, you can compare the effects of market volatilities on Invesco Energy and Allianzgi Small-cap 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 Energy with a short position of Allianzgi Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Energy and Allianzgi Small-cap.

Diversification Opportunities for Invesco Energy and Allianzgi Small-cap

0.07

Correlation Coefficient

Invesco Energy  Allianzgi Small-cap

Significant diversification

The 3 months correlation between Invesco and Allianzgi is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Energy Fund and Allianzgi Small Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianzgi Small Cap and Invesco Energy 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 Energy Fund are associated (or correlated) with Allianzgi Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianzgi Small Cap has no effect on the direction of Invesco Energy i.e., Invesco Energy and Allianzgi Small-cap go up and down completely randomly.

Pair Corralation between Invesco Energy and Allianzgi Small-cap

Assuming the 90 days horizon Invesco Energy Fund is expected to generate 0.96 times more return on investment than Allianzgi Small-cap. However, Invesco Energy Fund is 1.04 times less risky than Allianzgi Small-cap. It trades about 0.13 of its potential returns per unit of risk. Allianzgi Small Cap Fund is currently generating about -0.12 per unit of risk. If you would invest  2,315  in Invesco Energy Fund on December 30, 2024 and sell it today you would earn a total of  204.00  from holding Invesco Energy Fund or generate 8.81% return on investment over 90 days.

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

Invesco Energy Fund  vs.  Allianzgi Small Cap Fund

Invesco Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Energy Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Invesco Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Allianzgi Small Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Invesco Energy and Allianzgi Small-cap

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

The idea behind Invesco Energy Fund and Allianzgi Small Cap Fund 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.