Correlation Between Active International and Invesco Equally-weighted

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

By analyzing existing cross correlation between Active International Allocation and Invesco Equally Weighted Sp, you can compare the effects of market volatilities on Active International and Invesco Equally-weighted 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 Active International with a short position of Invesco Equally-weighted. Check out your portfolio center. Please also check ongoing floating volatility patterns of Active International and Invesco Equally-weighted.

Diversification Opportunities for Active International and Invesco Equally-weighted

0.16

Correlation Coefficient

Active International  Invesco Equally-weighted

Average diversification

The 3 months correlation between Active and Invesco is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Active International Allocatio and Invesco Equally Weighted Sp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Equally-weighted and Active International 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 Active International Allocation are associated (or correlated) with Invesco Equally-weighted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Equally-weighted has no effect on the direction of Active International i.e., Active International and Invesco Equally-weighted go up and down completely randomly.

Pair Corralation between Active International and Invesco Equally-weighted

Assuming the 90 days horizon Active International is expected to generate 1.7 times less return on investment than Invesco Equally-weighted. In addition to that, Active International is 1.02 times more volatile than Invesco Equally Weighted Sp. It trades about 0.04 of its total potential returns per unit of risk. Invesco Equally Weighted Sp is currently generating about 0.07 per unit of volatility. If you would invest  6,416  in Invesco Equally Weighted Sp on September 3, 2024 and sell it today you would earn a total of  2,023  from holding Invesco Equally Weighted Sp or generate 31.53% return on investment over 90 days.

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

Active International Allocatio  vs.  Invesco Equally Weighted Sp

Active International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Active International Allocation are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Active International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Equally-weighted

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Equally Weighted Sp are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Invesco Equally-weighted may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Active International and Invesco Equally-weighted

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

The idea behind Active International Allocation and Invesco Equally Weighted Sp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.