Correlation Between Invesco Fundamental and Invesco SP

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

By analyzing existing cross correlation between Invesco Fundamental Investment and Invesco SP 500, you can compare the effects of market volatilities on Invesco Fundamental and Invesco SP 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 Fundamental with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Fundamental and Invesco SP.

Diversification Opportunities for Invesco Fundamental and Invesco SP

-0.41

Correlation Coefficient

Invesco Fundamental  Invesco SP

Very good diversification

The 3 months correlation between Invesco and Invesco is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Fundamental Investment and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 and Invesco Fundamental 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 Fundamental Investment are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Invesco Fundamental i.e., Invesco Fundamental and Invesco SP go up and down completely randomly.

Pair Corralation between Invesco Fundamental and Invesco SP

Given the investment horizon of 90 days Invesco Fundamental Investment is expected to generate 0.4 times more return on investment than Invesco SP. However, Invesco Fundamental Investment is 2.52 times less risky than Invesco SP. It trades about 0.18 of its potential returns per unit of risk. Invesco SP 500 is currently generating about -0.12 per unit of risk. If you would invest  2,332  in Invesco Fundamental Investment on December 21, 2024 and sell it today you would earn a total of  54.00  from holding Invesco Fundamental Investment or generate 2.32% return on investment over 90 days.

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

Invesco Fundamental Investment  vs.  Invesco SP 500

Invesco Fundamental

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Fundamental Investment are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Invesco Fundamental is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Invesco SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Invesco SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco Fundamental and Invesco SP

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

The idea behind Invesco Fundamental Investment and Invesco SP 500 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.