Correlation Between Invesco DWA and Principal

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

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

Diversification Opportunities for Invesco DWA and Principal

0.74

Correlation Coefficient

Invesco DWA  Principal

Poor diversification

The 3 months correlation between Invesco and Principal is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Consumer and Principal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal 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 Consumer 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 DWA i.e., Invesco DWA and Principal go up and down completely randomly.

Pair Corralation between Invesco DWA and Principal

If you would invest  10,044  in Invesco DWA Consumer on September 14, 2024 and sell it today you would earn a total of  849.15  from holding Invesco DWA Consumer or generate 8.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Invesco DWA Consumer  vs.  Principal

Invesco DWA Consumer

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Consumer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical and fundamental indicators, Invesco DWA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Principal

Risk-Adjusted Performance

0 of 100

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 rather sound technical and fundamental indicators, Principal is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco DWA and Principal

The main advantage of trading using opposite Invesco DWA and Principal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DWA 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 DWA Consumer 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.