Correlation Between Global X and Invesco Dynamic

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

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

Diversification Opportunities for Global X and Invesco Dynamic

0.86

Correlation Coefficient

Global X  Invesco Dynamic

Very poor diversification

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

Pair Corralation between Global X and Invesco Dynamic

Given the investment horizon of 90 days Global X Infrastructure is expected to generate 1.08 times more return on investment than Invesco Dynamic. However, Global X is 1.08 times more volatile than Invesco Dynamic Leisure. It trades about 0.08 of its potential returns per unit of risk. Invesco Dynamic Leisure is currently generating about 0.07 per unit of risk. If you would invest  2,656  in Global X Infrastructure on September 25, 2024 and sell it today you would earn a total of  1,481  from holding Global X Infrastructure or generate 55.76% return on investment over 90 days.

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

Global X Infrastructure  vs.  Invesco Dynamic Leisure

Global X Infrastructure

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Infrastructure are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Global X is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Dynamic Leisure

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Leisure are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Invesco Dynamic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global X and Invesco Dynamic

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

The idea behind Global X Infrastructure and Invesco Dynamic Leisure 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.