Correlation Between Invesco Technology and Value Line

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

Diversification Opportunities for Invesco Technology and Value Line

0.81

Correlation Coefficient

Invesco Technology  Value Line

Very poor diversification

The 3 months correlation between Invesco and Value is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Technology Fund and Value Line Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Line Select 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 Value Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Line Select has no effect on the direction of Invesco Technology i.e., Invesco Technology and Value Line go up and down completely randomly.

Pair Corralation between Invesco Technology and Value Line

Assuming the 90 days horizon Invesco Technology Fund is expected to generate 1.7 times more return on investment than Value Line. However, Invesco Technology is 1.7 times more volatile than Value Line Select. It trades about 0.26 of its potential returns per unit of risk. Value Line Select is currently generating about 0.1 per unit of risk. If you would invest  6,050  in Invesco Technology Fund on September 4, 2024 and sell it today you would earn a total of  1,353  from holding Invesco Technology Fund or generate 22.36% return on investment over 90 days.

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

Invesco Technology Fund  vs.  Value Line Select

Invesco Technology

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Technology Fund 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 Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Value Line Select

Risk-Adjusted Performance

8 of 100

OK

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

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

The idea behind Invesco Technology Fund and Value Line Select 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.