Correlation Between Ppm Core and Invesco Discovery

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

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

Diversification Opportunities for Ppm Core and Invesco Discovery

0.28

Correlation Coefficient

Ppm Core  Invesco Discovery

Modest diversification

The 3 months correlation between Ppm and Invesco is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ppm Core Plus and Invesco Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Discovery and Ppm Core 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 Ppm Core Plus are associated (or correlated) with Invesco Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Discovery has no effect on the direction of Ppm Core i.e., Ppm Core and Invesco Discovery go up and down completely randomly.

Pair Corralation between Ppm Core and Invesco Discovery

Assuming the 90 days horizon Ppm Core is expected to generate 3.7 times less return on investment than Invesco Discovery. But when comparing it to its historical volatility, Ppm Core Plus is 3.4 times less risky than Invesco Discovery. It trades about 0.04 of its potential returns per unit of risk. Invesco Discovery is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,328  in Invesco Discovery on December 4, 2024 and sell it today you would earn a total of  2,068  from holding Invesco Discovery or generate 28.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.34%
Values	Daily Returns

Ppm Core Plus  vs.  Invesco Discovery

Ppm Core Plus

Risk-Adjusted Performance

Weak

Over the last 90 days Ppm Core Plus has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Ppm Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Discovery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Discovery has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Ppm Core and Invesco Discovery

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

The idea behind Ppm Core Plus and Invesco Discovery 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.