Correlation Between Invesco International and Invesco Asia

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

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

Diversification Opportunities for Invesco International and Invesco Asia

0.9

Correlation Coefficient

Invesco International  Invesco Asia

Almost no diversification

The 3 months correlation between Invesco and Invesco is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Invesco International Small and Invesco Asia Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Asia Pacific and Invesco International 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 International Small are associated (or correlated) with Invesco Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Asia Pacific has no effect on the direction of Invesco International i.e., Invesco International and Invesco Asia go up and down completely randomly.

Pair Corralation between Invesco International and Invesco Asia

Assuming the 90 days horizon Invesco International Small is expected to under-perform the Invesco Asia. But the mutual fund apears to be less risky and, when comparing its historical volatility, Invesco International Small is 1.51 times less risky than Invesco Asia. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Invesco Asia Pacific is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,970  in Invesco Asia Pacific on September 13, 2024 and sell it today you would earn a total of  59.00  from holding Invesco Asia Pacific or generate 1.99% return on investment over 90 days.

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

Invesco International Small  vs.  Invesco Asia Pacific

Invesco International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco International Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Invesco International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Asia Pacific

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Asia Pacific are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Invesco Asia 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 International and Invesco Asia

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

The idea behind Invesco International Small and Invesco Asia Pacific 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.