Correlation Between Invesco Agriculture and REX AI

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

By analyzing existing cross correlation between Invesco Agriculture Commodity and REX AI Equity, you can compare the effects of market volatilities on Invesco Agriculture and REX AI 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 Agriculture with a short position of REX AI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Agriculture and REX AI.

Diversification Opportunities for Invesco Agriculture and REX AI

0.73

Correlation Coefficient

Invesco Agriculture  REX AI

Poor diversification

The 3 months correlation between Invesco and REX is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Agriculture Commodity and REX AI Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX AI Equity and Invesco Agriculture 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 Agriculture Commodity are associated (or correlated) with REX AI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX AI Equity has no effect on the direction of Invesco Agriculture i.e., Invesco Agriculture and REX AI go up and down completely randomly.

Pair Corralation between Invesco Agriculture and REX AI

Given the investment horizon of 90 days Invesco Agriculture Commodity is expected to generate 0.69 times more return on investment than REX AI. However, Invesco Agriculture Commodity is 1.45 times less risky than REX AI. It trades about 0.12 of its potential returns per unit of risk. REX AI Equity is currently generating about 0.03 per unit of risk. If you would invest  3,385  in Invesco Agriculture Commodity on October 1, 2024 and sell it today you would earn a total of  60.00  from holding Invesco Agriculture Commodity or generate 1.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Invesco Agriculture Commodity  vs.  REX AI Equity

Invesco Agriculture

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Agriculture Commodity are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Invesco Agriculture is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

REX AI Equity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in REX AI Equity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, REX AI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco Agriculture and REX AI

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

The idea behind Invesco Agriculture Commodity and REX AI Equity 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.