Correlation Between Invesco Global and Ecofin Global

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

Diversification Opportunities for Invesco Global and Ecofin Global

0.03

Correlation Coefficient

Invesco Global  Ecofin Global

Significant diversification

The 3 months correlation between Invesco and Ecofin is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Global Water and Ecofin Global Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofin Global 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 Ecofin Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecofin Global Water has no effect on the direction of Invesco Global i.e., Invesco Global and Ecofin Global go up and down completely randomly.

Pair Corralation between Invesco Global and Ecofin Global

Considering the 90-day investment horizon Invesco Global Water is expected to generate 1.05 times more return on investment than Ecofin Global. However, Invesco Global is 1.05 times more volatile than Ecofin Global Water. It trades about 0.08 of its potential returns per unit of risk. Ecofin Global Water is currently generating about 0.05 per unit of risk. If you would invest  3,942  in Invesco Global Water on December 27, 2024 and sell it today you would earn a total of  142.00  from holding Invesco Global Water or generate 3.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.8%
Values	Daily Returns

Invesco Global Water  vs.  Ecofin Global Water

Invesco Global Water

Risk-Adjusted Performance

Modest

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 current stock price disarray, may contribute to short-term losses for the investors.

Ecofin Global Water

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofin Global Water are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Ecofin Global is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Invesco Global and Ecofin Global

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

The idea behind Invesco Global Water and Ecofin Global Water 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.