Correlation Between Invesco Financial and Invesco Variable

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

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

Diversification Opportunities for Invesco Financial and Invesco Variable

0.62

Correlation Coefficient

Invesco Financial  Invesco Variable

Poor diversification

The 3 months correlation between Invesco and Invesco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Financial Preferred and Invesco Variable Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Variable Rate and Invesco Financial 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 Financial Preferred are associated (or correlated) with Invesco Variable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Variable Rate has no effect on the direction of Invesco Financial i.e., Invesco Financial and Invesco Variable go up and down completely randomly.

Pair Corralation between Invesco Financial and Invesco Variable

Considering the 90-day investment horizon Invesco Financial is expected to generate 2.3 times less return on investment than Invesco Variable. In addition to that, Invesco Financial is 2.58 times more volatile than Invesco Variable Rate. It trades about 0.01 of its total potential returns per unit of risk. Invesco Variable Rate is currently generating about 0.08 per unit of volatility. If you would invest  2,396  in Invesco Variable Rate on December 28, 2024 and sell it today you would earn a total of  30.00  from holding Invesco Variable Rate or generate 1.25% return on investment over 90 days.

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

Invesco Financial Preferred  vs.  Invesco Variable Rate

Invesco Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Financial Preferred are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Invesco Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Invesco Variable Rate

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Variable Rate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Invesco Variable is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Invesco Financial and Invesco Variable

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

The idea behind Invesco Financial Preferred and Invesco Variable Rate 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.