Correlation Between Invesco High and Vanguard Value

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

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

Diversification Opportunities for Invesco High and Vanguard Value

0.37

Correlation Coefficient

Invesco High  Vanguard Value

Weak diversification

The 3 months correlation between Invesco and Vanguard is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Invesco High Yield and Vanguard Value Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Factor and Invesco High 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 High Yield are associated (or correlated) with Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Factor has no effect on the direction of Invesco High i.e., Invesco High and Vanguard Value go up and down completely randomly.

Pair Corralation between Invesco High and Vanguard Value

Considering the 90-day investment horizon Invesco High Yield is expected to generate 0.86 times more return on investment than Vanguard Value. However, Invesco High Yield is 1.16 times less risky than Vanguard Value. It trades about 0.04 of its potential returns per unit of risk. Vanguard Value Factor is currently generating about -0.04 per unit of risk. If you would invest  2,095  in Invesco High Yield on December 29, 2024 and sell it today you would earn a total of  34.00  from holding Invesco High Yield or generate 1.62% return on investment over 90 days.

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

Invesco High Yield  vs.  Vanguard Value Factor

Invesco High Yield

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco High Yield are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Invesco High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Value Factor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Value Factor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco High and Vanguard Value

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

The idea behind Invesco High Yield and Vanguard Value Factor 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.