Correlation Between Invesco Gold and Eafe Pure

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

By analyzing existing cross correlation between Invesco Gold Special and The Eafe Pure, you can compare the effects of market volatilities on Invesco Gold and Eafe Pure 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 Gold with a short position of Eafe Pure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Gold and Eafe Pure.

Diversification Opportunities for Invesco Gold and Eafe Pure

0.7

Correlation Coefficient

Invesco Gold  Eafe Pure

Poor diversification

The 3 months correlation between Invesco and Eafe is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Gold Special and The Eafe Pure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eafe Pure and Invesco Gold 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 Gold Special are associated (or correlated) with Eafe Pure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eafe Pure has no effect on the direction of Invesco Gold i.e., Invesco Gold and Eafe Pure go up and down completely randomly.

Pair Corralation between Invesco Gold and Eafe Pure

Assuming the 90 days horizon Invesco Gold Special is expected to under-perform the Eafe Pure. In addition to that, Invesco Gold is 1.86 times more volatile than The Eafe Pure. It trades about -0.25 of its total potential returns per unit of risk. The Eafe Pure is currently generating about -0.36 per unit of volatility. If you would invest  1,321  in The Eafe Pure on October 9, 2024 and sell it today you would lose (93.00) from holding The Eafe Pure or give up 7.04% of portfolio value over 90 days.

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

Invesco Gold Special  vs.  The Eafe Pure

Invesco Gold Special

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Gold Special 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.

Eafe Pure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Eafe Pure 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 Gold and Eafe Pure

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

The idea behind Invesco Gold Special and The Eafe Pure 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.