Correlation Between Invesco Technology and Lifex Income

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

Diversification Opportunities for Invesco Technology and Lifex Income

0.55

Correlation Coefficient

Invesco Technology  Lifex Income

Very weak diversification

The 3 months correlation between Invesco and Lifex is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Technology Fund and Lifex Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifex Income 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 Lifex Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifex Income has no effect on the direction of Invesco Technology i.e., Invesco Technology and Lifex Income go up and down completely randomly.

Pair Corralation between Invesco Technology and Lifex Income

Assuming the 90 days horizon Invesco Technology Fund is expected to generate 3.65 times more return on investment than Lifex Income. However, Invesco Technology is 3.65 times more volatile than Lifex Income. It trades about 0.11 of its potential returns per unit of risk. Lifex Income is currently generating about 0.06 per unit of risk. If you would invest  3,641  in Invesco Technology Fund on September 16, 2024 and sell it today you would earn a total of  3,955  from holding Invesco Technology Fund or generate 108.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	45.36%
Values	Daily Returns

Invesco Technology Fund  vs.  Lifex Income

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.

Lifex Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lifex Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Lifex Income 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 Technology and Lifex Income

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

The idea behind Invesco Technology Fund and Lifex Income 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.