Correlation Between Invesco DWA and Invesco BuyBack

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

By analyzing existing cross correlation between Invesco DWA Momentum and Invesco BuyBack Achievers, you can compare the effects of market volatilities on Invesco DWA and Invesco BuyBack 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 DWA with a short position of Invesco BuyBack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DWA and Invesco BuyBack.

Diversification Opportunities for Invesco DWA and Invesco BuyBack

0.99

Correlation Coefficient

Invesco DWA  Invesco BuyBack

No risk reduction

The 3 months correlation between Invesco and Invesco is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Momentum and Invesco BuyBack Achievers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco BuyBack Achievers and Invesco DWA 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 DWA Momentum are associated (or correlated) with Invesco BuyBack. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco BuyBack Achievers has no effect on the direction of Invesco DWA i.e., Invesco DWA and Invesco BuyBack go up and down completely randomly.

Pair Corralation between Invesco DWA and Invesco BuyBack

Considering the 90-day investment horizon Invesco DWA Momentum is expected to generate 1.3 times more return on investment than Invesco BuyBack. However, Invesco DWA is 1.3 times more volatile than Invesco BuyBack Achievers. It trades about 0.2 of its potential returns per unit of risk. Invesco BuyBack Achievers is currently generating about 0.18 per unit of risk. If you would invest  10,017  in Invesco DWA Momentum on September 13, 2024 and sell it today you would earn a total of  1,342  from holding Invesco DWA Momentum or generate 13.4% return on investment over 90 days.

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

Invesco DWA Momentum  vs.  Invesco BuyBack Achievers

Invesco DWA Momentum

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Momentum are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Invesco DWA reported solid returns over the last few months and may actually be approaching a breakup point.

Invesco BuyBack Achievers

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco BuyBack Achievers are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward-looking signals, Invesco BuyBack may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco DWA and Invesco BuyBack

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

The idea behind Invesco DWA Momentum and Invesco BuyBack Achievers 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.