Correlation Between Invesco Gold and Sierra Tactical

Can any of the company-specific risk be diversified away by investing in both Invesco Gold and Sierra Tactical 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 Sierra Tactical 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 Sierra Tactical Risk, you can compare the effects of market volatilities on Invesco Gold and Sierra Tactical 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 Sierra Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Gold and Sierra Tactical.

Diversification Opportunities for Invesco Gold and Sierra Tactical

0.26

Correlation Coefficient

Invesco Gold  Sierra Tactical

Modest diversification

The 3 months correlation between Invesco and Sierra is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Gold Special and Sierra Tactical Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Tactical Risk 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 Sierra Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Tactical Risk has no effect on the direction of Invesco Gold i.e., Invesco Gold and Sierra Tactical go up and down completely randomly.

Pair Corralation between Invesco Gold and Sierra Tactical

Assuming the 90 days horizon Invesco Gold Special is expected to generate 5.55 times more return on investment than Sierra Tactical. However, Invesco Gold is 5.55 times more volatile than Sierra Tactical Risk. It trades about 0.08 of its potential returns per unit of risk. Sierra Tactical Risk is currently generating about 0.14 per unit of risk. If you would invest  2,645  in Invesco Gold Special on September 3, 2024 and sell it today you would earn a total of  209.00  from holding Invesco Gold Special or generate 7.9% return on investment over 90 days.

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

Invesco Gold Special  vs.  Sierra Tactical Risk

Invesco Gold Special

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Gold Special are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sierra Tactical Risk

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sierra Tactical Risk are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Sierra Tactical 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 Gold and Sierra Tactical

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

The idea behind Invesco Gold Special and Sierra Tactical Risk 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.