Correlation Between Invesco Multi and X Square

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

By analyzing existing cross correlation between Invesco Multi Strategy Alternative and X Square Balanced, you can compare the effects of market volatilities on Invesco Multi and X Square 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 Multi with a short position of X Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Multi and X Square.

Diversification Opportunities for Invesco Multi and X Square

0.71

Correlation Coefficient

Invesco Multi  X Square

Poor diversification

The 3 months correlation between Invesco and SQBIX is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Multi Strategy Alterna and X Square Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Square Balanced and Invesco Multi 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 Multi Strategy Alternative are associated (or correlated) with X Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Square Balanced has no effect on the direction of Invesco Multi i.e., Invesco Multi and X Square go up and down completely randomly.

Pair Corralation between Invesco Multi and X Square

Given the investment horizon of 90 days Invesco Multi is expected to generate 17.3 times less return on investment than X Square. But when comparing it to its historical volatility, Invesco Multi Strategy Alternative is 1.17 times less risky than X Square. It trades about 0.01 of its potential returns per unit of risk. X Square Balanced is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,086  in X Square Balanced on September 30, 2024 and sell it today you would earn a total of  309.00  from holding X Square Balanced or generate 28.45% return on investment over 90 days.

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

Invesco Multi Strategy Alterna  vs.  X Square Balanced

Invesco Multi Strategy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Multi Strategy Alternative are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Invesco Multi is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

X Square Balanced

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in X Square Balanced are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, X Square 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 Multi and X Square

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

The idea behind Invesco Multi Strategy Alternative and X Square Balanced 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.