Correlation Between Invesco Global and Consolidated Water

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

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

Diversification Opportunities for Invesco Global and Consolidated Water

0.07

Correlation Coefficient

Invesco Global  Consolidated Water

Significant diversification

The 3 months correlation between Invesco and Consolidated is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Global Water and Consolidated Water Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Water and Invesco Global 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 Global Water are associated (or correlated) with Consolidated Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Water has no effect on the direction of Invesco Global i.e., Invesco Global and Consolidated Water go up and down completely randomly.

Pair Corralation between Invesco Global and Consolidated Water

Considering the 90-day investment horizon Invesco Global Water is expected to generate 0.37 times more return on investment than Consolidated Water. However, Invesco Global Water is 2.7 times less risky than Consolidated Water. It trades about -0.07 of its potential returns per unit of risk. Consolidated Water Co is currently generating about -0.03 per unit of risk. If you would invest  4,068  in Invesco Global Water on September 19, 2024 and sell it today you would lose (35.00) from holding Invesco Global Water or give up 0.86% of portfolio value over 90 days.

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

Invesco Global Water  vs.  Consolidated Water Co

Invesco Global Water

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Global Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Invesco Global is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Consolidated Water

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Consolidated Water Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Consolidated Water is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco Global and Consolidated Water

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

The idea behind Invesco Global Water and Consolidated Water Co 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.