Correlation Between US Diversified and Invesco Active

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

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

Diversification Opportunities for US Diversified and Invesco Active

0.62

Correlation Coefficient

US Diversified  Invesco Active

Poor diversification

The 3 months correlation between PPTY and Invesco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding US Diversified Real and Invesco Active Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Active Real and US Diversified 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 US Diversified Real are associated (or correlated) with Invesco Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Active Real has no effect on the direction of US Diversified i.e., US Diversified and Invesco Active go up and down completely randomly.

Pair Corralation between US Diversified and Invesco Active

Given the investment horizon of 90 days US Diversified Real is expected to under-perform the Invesco Active. But the etf apears to be less risky and, when comparing its historical volatility, US Diversified Real is 1.02 times less risky than Invesco Active. The etf trades about -0.01 of its potential returns per unit of risk. The Invesco Active Real is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,896  in Invesco Active Real on December 28, 2024 and sell it today you would earn a total of  308.00  from holding Invesco Active Real or generate 3.46% return on investment over 90 days.

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

US Diversified Real  vs.  Invesco Active Real

US Diversified Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Diversified Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, US Diversified is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Invesco Active Real

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Active Real are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Invesco Active is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with US Diversified and Invesco Active

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

The idea behind US Diversified Real and Invesco Active Real 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.