Correlation Between Invesco DWA and Invesco DWA

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

Diversification Opportunities for Invesco DWA and Invesco DWA

0.86

Correlation Coefficient

Invesco DWA  Invesco DWA

Very poor diversification

The 3 months correlation between Invesco and Invesco is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Consumer and Invesco DWA Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Healthcare 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 Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Healthcare has no effect on the direction of Invesco DWA i.e., Invesco DWA and Invesco DWA go up and down completely randomly.

Pair Corralation between Invesco DWA and Invesco DWA

Considering the 90-day investment horizon Invesco DWA Consumer is expected to under-perform the Invesco DWA. But the etf apears to be less risky and, when comparing its historical volatility, Invesco DWA Consumer is 1.45 times less risky than Invesco DWA. The etf trades about -0.3 of its potential returns per unit of risk. The Invesco DWA Healthcare is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  4,307  in Invesco DWA Healthcare on December 5, 2024 and sell it today you would lose (306.00) from holding Invesco DWA Healthcare or give up 7.1% of portfolio value over 90 days.

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

Invesco DWA Consumer  vs.  Invesco DWA Healthcare

Invesco DWA Consumer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco DWA Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Etf's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Invesco DWA Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco DWA Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with Invesco DWA and Invesco DWA

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

The idea behind Invesco DWA Consumer and Invesco DWA Healthcare 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.