Correlation Between Invesco Optimum and WisdomTree Continuous

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

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

Diversification Opportunities for Invesco Optimum and WisdomTree Continuous

0.86

Correlation Coefficient

Invesco Optimum  WisdomTree Continuous

Very poor diversification

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

Pair Corralation between Invesco Optimum and WisdomTree Continuous

Given the investment horizon of 90 days Invesco Optimum Yield is expected to generate 1.21 times more return on investment than WisdomTree Continuous. However, Invesco Optimum is 1.21 times more volatile than WisdomTree Continuous Commodity. It trades about 0.13 of its potential returns per unit of risk. WisdomTree Continuous Commodity is currently generating about 0.08 per unit of risk. If you would invest  1,282  in Invesco Optimum Yield on November 28, 2024 and sell it today you would earn a total of  74.00  from holding Invesco Optimum Yield or generate 5.77% return on investment over 90 days.

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

Invesco Optimum Yield  vs.  WisdomTree Continuous Commodit

Invesco Optimum Yield

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Optimum Yield are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Invesco Optimum is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

WisdomTree Continuous

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Continuous Commodity are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, WisdomTree Continuous is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco Optimum and WisdomTree Continuous

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

The idea behind Invesco Optimum Yield and WisdomTree Continuous Commodity 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.