Correlation Between Invesco FTSE and Principal

Can any of the company-specific risk be diversified away by investing in both Invesco FTSE and Principal 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 Principal 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 Principal, you can compare the effects of market volatilities on Invesco FTSE and Principal 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 Principal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco FTSE and Principal.

Diversification Opportunities for Invesco FTSE and Principal

0.0

Correlation Coefficient

Invesco FTSE  Principal

Pay attention - limited upside

The 3 months correlation between Invesco and Principal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and Principal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal 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 Principal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and Principal go up and down completely randomly.

Pair Corralation between Invesco FTSE and Principal

If you would invest  3,164  in Invesco FTSE RAFI on December 22, 2024 and sell it today you would earn a total of  283.00  from holding Invesco FTSE RAFI or generate 8.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Invesco FTSE RAFI  vs.  Principal

Invesco FTSE RAFI

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco FTSE RAFI are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Invesco FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Principal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Principal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Principal is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco FTSE and Principal

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

The idea behind Invesco FTSE RAFI and Principal 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.