Correlation Between Invesco Aerospace and Invesco DWA

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

Diversification Opportunities for Invesco Aerospace and Invesco DWA

0.92

Correlation Coefficient

Invesco Aerospace  Invesco DWA

Almost no diversification

The 3 months correlation between Invesco and Invesco is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Aerospace Defense and Invesco DWA Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Industrials 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 Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Industrials has no effect on the direction of Invesco Aerospace i.e., Invesco Aerospace and Invesco DWA go up and down completely randomly.

Pair Corralation between Invesco Aerospace and Invesco DWA

Considering the 90-day investment horizon Invesco Aerospace is expected to generate 2.4 times less return on investment than Invesco DWA. But when comparing it to its historical volatility, Invesco Aerospace Defense is 1.29 times less risky than Invesco DWA. It trades about 0.1 of its potential returns per unit of risk. Invesco DWA Industrials is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  14,262  in Invesco DWA Industrials on September 12, 2024 and sell it today you would earn a total of  2,447  from holding Invesco DWA Industrials or generate 17.16% return on investment over 90 days.

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

Invesco Aerospace Defense  vs.  Invesco DWA Industrials

Invesco Aerospace Defense

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Aerospace Defense are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Invesco Aerospace may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco DWA Industrials

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Industrials are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Invesco DWA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Aerospace and Invesco DWA

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

The idea behind Invesco Aerospace Defense and Invesco DWA Industrials 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.