Correlation Between Scharf Fund and Invesco Balanced

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

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

Diversification Opportunities for Scharf Fund and Invesco Balanced

0.7

Correlation Coefficient

Scharf Fund  Invesco Balanced

Poor diversification

The 3 months correlation between Scharf and Invesco is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Scharf Fund Retail and Invesco Balanced Risk Allocati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Balanced Risk and Scharf Fund 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 Scharf Fund Retail are associated (or correlated) with Invesco Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Balanced Risk has no effect on the direction of Scharf Fund i.e., Scharf Fund and Invesco Balanced go up and down completely randomly.

Pair Corralation between Scharf Fund and Invesco Balanced

Assuming the 90 days horizon Scharf Fund Retail is expected to generate 0.55 times more return on investment than Invesco Balanced. However, Scharf Fund Retail is 1.82 times less risky than Invesco Balanced. It trades about -0.13 of its potential returns per unit of risk. Invesco Balanced Risk Allocation is currently generating about -0.18 per unit of risk. If you would invest  5,518  in Scharf Fund Retail on September 27, 2024 and sell it today you would lose (325.00) from holding Scharf Fund Retail or give up 5.89% of portfolio value over 90 days.

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

Scharf Fund Retail  vs.  Invesco Balanced Risk Allocati

Scharf Fund Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scharf Fund Retail has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Scharf Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Balanced Risk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Balanced Risk Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward 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 Scharf Fund and Invesco Balanced

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

The idea behind Scharf Fund Retail and Invesco Balanced Risk Allocation 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.