Correlation Between Invesco Dynamic and Select STOXX

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

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

Diversification Opportunities for Invesco Dynamic and Select STOXX

-0.5

Correlation Coefficient

Invesco Dynamic  Select STOXX

Very good diversification

The 3 months correlation between Invesco and Select is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Food and Select STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select STOXX Europe and Invesco Dynamic 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 Dynamic Food are associated (or correlated) with Select STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select STOXX Europe has no effect on the direction of Invesco Dynamic i.e., Invesco Dynamic and Select STOXX go up and down completely randomly.

Pair Corralation between Invesco Dynamic and Select STOXX

Considering the 90-day investment horizon Invesco Dynamic Food is expected to under-perform the Select STOXX. But the etf apears to be less risky and, when comparing its historical volatility, Invesco Dynamic Food is 2.17 times less risky than Select STOXX. The etf trades about -0.01 of its potential returns per unit of risk. The Select STOXX Europe is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,440  in Select STOXX Europe on December 28, 2024 and sell it today you would earn a total of  994.00  from holding Select STOXX Europe or generate 40.74% return on investment over 90 days.

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

Invesco Dynamic Food  vs.  Select STOXX Europe

Invesco Dynamic Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Dynamic Food has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady fundamental drivers, Invesco Dynamic is not utilizing all of its potentials. The newest stock price chaos, may contribute to medium-term losses for the stakeholders.

Select STOXX Europe

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Select STOXX Europe are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Select STOXX exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Dynamic and Select STOXX

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

The idea behind Invesco Dynamic Food and Select STOXX Europe 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.