Correlation Between Invesco FTSE and Fidelity Disruptive

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

By analyzing existing cross correlation between Invesco FTSE RAFI and Fidelity Disruptive Automation, you can compare the effects of market volatilities on Invesco FTSE and Fidelity Disruptive 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 FTSE with a short position of Fidelity Disruptive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco FTSE and Fidelity Disruptive.

Diversification Opportunities for Invesco FTSE and Fidelity Disruptive

0.09

Correlation Coefficient

Invesco FTSE  Fidelity Disruptive

Significant diversification

The 3 months correlation between Invesco and Fidelity is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and Fidelity Disruptive Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Disruptive and Invesco FTSE 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 FTSE RAFI are associated (or correlated) with Fidelity Disruptive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Disruptive has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and Fidelity Disruptive go up and down completely randomly.

Pair Corralation between Invesco FTSE and Fidelity Disruptive

Considering the 90-day investment horizon Invesco FTSE is expected to generate 2.69 times less return on investment than Fidelity Disruptive. But when comparing it to its historical volatility, Invesco FTSE RAFI is 1.35 times less risky than Fidelity Disruptive. It trades about 0.02 of its potential returns per unit of risk. Fidelity Disruptive Automation is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,534  in Fidelity Disruptive Automation on October 23, 2024 and sell it today you would earn a total of  369.00  from holding Fidelity Disruptive Automation or generate 14.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	81.78%
Values	Daily Returns

Invesco FTSE RAFI  vs.  Fidelity Disruptive Automation

Invesco FTSE RAFI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco FTSE RAFI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Invesco FTSE is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Fidelity Disruptive

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Disruptive Automation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Fidelity Disruptive may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Invesco FTSE and Fidelity Disruptive

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

The idea behind Invesco FTSE RAFI and Fidelity Disruptive Automation 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.