Correlation Between Invesco Global and Invesco DWA

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

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

Diversification Opportunities for Invesco Global and Invesco DWA

0.34

Correlation Coefficient

Invesco Global  Invesco DWA

Weak diversification

The 3 months correlation between Invesco and Invesco is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Global Clean and Invesco DWA Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Industrials and Invesco Global 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 Global Clean are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Industrials has no effect on the direction of Invesco Global i.e., Invesco Global and Invesco DWA go up and down completely randomly.

Pair Corralation between Invesco Global and Invesco DWA

Considering the 90-day investment horizon Invesco Global Clean is expected to generate 0.85 times more return on investment than Invesco DWA. However, Invesco Global Clean is 1.18 times less risky than Invesco DWA. It trades about -0.02 of its potential returns per unit of risk. Invesco DWA Industrials is currently generating about -0.08 per unit of risk. If you would invest  1,174  in Invesco Global Clean on December 22, 2024 and sell it today you would lose (30.00) from holding Invesco Global Clean or give up 2.56% of portfolio value over 90 days.

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

Invesco Global Clean  vs.  Invesco DWA Industrials

Invesco Global Clean

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Global Clean has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Invesco Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco DWA Industrials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco DWA Industrials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Invesco Global and Invesco DWA

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

The idea behind Invesco Global Clean and Invesco DWA Industrials 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.