Correlation Between Invesco Gold and Deutsche Short-term

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

Diversification Opportunities for Invesco Gold and Deutsche Short-term

0.68

Correlation Coefficient

Invesco Gold  Deutsche Short-term

Poor diversification

The 3 months correlation between Invesco and Deutsche is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Gold Special and Deutsche Short Term Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Short Term 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 Deutsche Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Short Term has no effect on the direction of Invesco Gold i.e., Invesco Gold and Deutsche Short-term go up and down completely randomly.

Pair Corralation between Invesco Gold and Deutsche Short-term

Assuming the 90 days horizon Invesco Gold Special is expected to generate 21.66 times more return on investment than Deutsche Short-term. However, Invesco Gold is 21.66 times more volatile than Deutsche Short Term Municipal. It trades about 0.25 of its potential returns per unit of risk. Deutsche Short Term Municipal is currently generating about 0.11 per unit of risk. If you would invest  2,561  in Invesco Gold Special on December 30, 2024 and sell it today you would earn a total of  712.00  from holding Invesco Gold Special or generate 27.8% return on investment over 90 days.

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

Invesco Gold Special  vs.  Deutsche Short Term Municipal

Invesco Gold Special

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Gold Special are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Short Term

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Short Term Municipal are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Deutsche Short-term 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 Deutsche Short-term

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

The idea behind Invesco Gold Special and Deutsche Short Term Municipal 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.