Correlation Between Invesco Technology and Dfa International

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

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

Diversification Opportunities for Invesco Technology and Dfa International

-0.87

Correlation Coefficient

Invesco Technology  Dfa International

Pay attention - limited upside

The 3 months correlation between Invesco and Dfa is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Technology Fund and Dfa International Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa International Real and Invesco Technology 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 Technology Fund are associated (or correlated) with Dfa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa International Real has no effect on the direction of Invesco Technology i.e., Invesco Technology and Dfa International go up and down completely randomly.

Pair Corralation between Invesco Technology and Dfa International

Assuming the 90 days horizon Invesco Technology Fund is expected to generate 1.17 times more return on investment than Dfa International. However, Invesco Technology is 1.17 times more volatile than Dfa International Real. It trades about 0.24 of its potential returns per unit of risk. Dfa International Real is currently generating about -0.26 per unit of risk. If you would invest  6,307  in Invesco Technology Fund on September 13, 2024 and sell it today you would earn a total of  1,273  from holding Invesco Technology Fund or generate 20.18% return on investment over 90 days.

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

Invesco Technology Fund  vs.  Dfa International Real

Invesco Technology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Technology Fund are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Dfa International Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dfa International Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fragile performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Invesco Technology and Dfa International

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

The idea behind Invesco Technology Fund and Dfa International Real 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.