Correlation Between Invesco International and Invesco Nasdaq

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

By analyzing existing cross correlation between Invesco International Diversified and Invesco Nasdaq 100, you can compare the effects of market volatilities on Invesco International and Invesco Nasdaq 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 Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco International and Invesco Nasdaq.

Diversification Opportunities for Invesco International and Invesco Nasdaq

-0.06

Correlation Coefficient

Invesco International  Invesco Nasdaq

Good diversification

The 3 months correlation between Invesco and Invesco is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Invesco International Diversif and Invesco Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Nasdaq 100 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 Diversified are associated (or correlated) with Invesco Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Nasdaq 100 has no effect on the direction of Invesco International i.e., Invesco International and Invesco Nasdaq go up and down completely randomly.

Pair Corralation between Invesco International and Invesco Nasdaq

Assuming the 90 days horizon Invesco International Diversified is expected to generate 0.64 times more return on investment than Invesco Nasdaq. However, Invesco International Diversified is 1.56 times less risky than Invesco Nasdaq. It trades about 0.05 of its potential returns per unit of risk. Invesco Nasdaq 100 is currently generating about -0.1 per unit of risk. If you would invest  1,505  in Invesco International Diversified on December 29, 2024 and sell it today you would earn a total of  40.00  from holding Invesco International Diversified or generate 2.66% return on investment over 90 days.

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

Invesco International Diversif  vs.  Invesco Nasdaq 100

Invesco International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco International Diversified are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental 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 Nasdaq 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Nasdaq 100 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak 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.

Pair Trading with Invesco International and Invesco Nasdaq

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

The idea behind Invesco International Diversified and Invesco Nasdaq 100 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.