Correlation Between Invesco Dynamic and Invesco DWA

Can any of the company-specific risk be diversified away by investing in both Invesco Dynamic 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 Dynamic 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 Dynamic Food and Invesco DWA Industrials, you can compare the effects of market volatilities on Invesco Dynamic 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 Dynamic with a short position of Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Dynamic and Invesco DWA.

Diversification Opportunities for Invesco Dynamic and Invesco DWA

0.48

Correlation Coefficient

Invesco Dynamic  Invesco DWA

Very weak diversification

The 3 months correlation between Invesco and Invesco is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Food 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 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 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 Dynamic i.e., Invesco Dynamic and Invesco DWA go up and down completely randomly.

Pair Corralation between Invesco Dynamic and Invesco DWA

Considering the 90-day investment horizon Invesco Dynamic is expected to generate 4.42 times less return on investment than Invesco DWA. But when comparing it to its historical volatility, Invesco Dynamic Food is 2.06 times less risky than Invesco DWA. It trades about 0.09 of its potential returns per unit of risk. Invesco DWA Industrials is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  14,481  in Invesco DWA Industrials on September 13, 2024 and sell it today you would earn a total of  2,369  from holding Invesco DWA Industrials or generate 16.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Invesco Dynamic Food  vs.  Invesco DWA Industrials

Invesco Dynamic Food

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Food are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Invesco DWA Industrials

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Industrials are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Invesco DWA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Dynamic and Invesco DWA

The main advantage of trading using opposite Invesco Dynamic and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Dynamic 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 Dynamic Food 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.