Correlation Between Invesco Technology and Clearbridge Small

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

Diversification Opportunities for Invesco Technology and Clearbridge Small

0.86

Correlation Coefficient

Invesco Technology  Clearbridge Small

Very poor diversification

The 3 months correlation between Invesco and Clearbridge is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Technology Fund and Clearbridge Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Small Cap 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 Clearbridge Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Small Cap has no effect on the direction of Invesco Technology i.e., Invesco Technology and Clearbridge Small go up and down completely randomly.

Pair Corralation between Invesco Technology and Clearbridge Small

Assuming the 90 days horizon Invesco Technology Fund is expected to under-perform the Clearbridge Small. In addition to that, Invesco Technology is 1.85 times more volatile than Clearbridge Small Cap. It trades about -0.1 of its total potential returns per unit of risk. Clearbridge Small Cap is currently generating about -0.1 per unit of volatility. If you would invest  7,068  in Clearbridge Small Cap on December 25, 2024 and sell it today you would lose (467.00) from holding Clearbridge Small Cap or give up 6.61% of portfolio value over 90 days.

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

Invesco Technology Fund  vs.  Clearbridge Small Cap

Invesco Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Technology Fund 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.

Clearbridge Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clearbridge Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental 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 Technology and Clearbridge Small

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

The idea behind Invesco Technology Fund and Clearbridge Small Cap 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.