Correlation Between Invesco Golden and Xtrackers Harvest

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

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

Diversification Opportunities for Invesco Golden and Xtrackers Harvest

0.75

Correlation Coefficient

Invesco Golden  Xtrackers Harvest

Poor diversification

The 3 months correlation between Invesco and Xtrackers is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Golden Dragon and Xtrackers Harvest CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Harvest CSI and Invesco Golden 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 Golden Dragon are associated (or correlated) with Xtrackers Harvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Harvest CSI has no effect on the direction of Invesco Golden i.e., Invesco Golden and Xtrackers Harvest go up and down completely randomly.

Pair Corralation between Invesco Golden and Xtrackers Harvest

Considering the 90-day investment horizon Invesco Golden Dragon is expected to under-perform the Xtrackers Harvest. In addition to that, Invesco Golden is 1.03 times more volatile than Xtrackers Harvest CSI. It trades about -0.01 of its total potential returns per unit of risk. Xtrackers Harvest CSI is currently generating about 0.01 per unit of volatility. If you would invest  2,906  in Xtrackers Harvest CSI on September 22, 2024 and sell it today you would lose (13.00) from holding Xtrackers Harvest CSI or give up 0.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.73%
Values	Daily Returns

Invesco Golden Dragon  vs.  Xtrackers Harvest CSI

Invesco Golden Dragon

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Golden Dragon are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, Invesco Golden revealed solid returns over the last few months and may actually be approaching a breakup point.

Xtrackers Harvest CSI

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Harvest CSI are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively sluggish technical indicators, Xtrackers Harvest unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Golden and Xtrackers Harvest

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

The idea behind Invesco Golden Dragon and Xtrackers Harvest CSI 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.