Correlation Between Invesco Aerospace and US Global

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

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

Diversification Opportunities for Invesco Aerospace and US Global

0.87

Correlation Coefficient

Invesco Aerospace  US Global

Very poor diversification

The 3 months correlation between Invesco and JETS is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Aerospace Defense and US Global Jets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Jets and Invesco Aerospace 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 Aerospace Defense are associated (or correlated) with US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Jets has no effect on the direction of Invesco Aerospace i.e., Invesco Aerospace and US Global go up and down completely randomly.

Pair Corralation between Invesco Aerospace and US Global

Considering the 90-day investment horizon Invesco Aerospace is expected to generate 2.92 times less return on investment than US Global. But when comparing it to its historical volatility, Invesco Aerospace Defense is 1.39 times less risky than US Global. It trades about 0.15 of its potential returns per unit of risk. US Global Jets is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,844  in US Global Jets on September 3, 2024 and sell it today you would earn a total of  624.00  from holding US Global Jets or generate 33.84% return on investment over 90 days.

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

Invesco Aerospace Defense  vs.  US Global Jets

Invesco Aerospace Defense

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Aerospace Defense are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Invesco Aerospace may actually be approaching a critical reversion point that can send shares even higher in January 2025.

US Global Jets

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US Global Jets are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, US Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Aerospace and US Global

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

The idea behind Invesco Aerospace Defense and US Global Jets 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.