Correlation Between Invesco DWA and Global X

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

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

Diversification Opportunities for Invesco DWA and Global X

-0.76

Correlation Coefficient

Invesco DWA  Global X

Pay attention - limited upside

The 3 months correlation between Invesco and Global is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Industrials and Global X Aging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Aging and Invesco DWA 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 DWA Industrials are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Aging has no effect on the direction of Invesco DWA i.e., Invesco DWA and Global X go up and down completely randomly.

Pair Corralation between Invesco DWA and Global X

Considering the 90-day investment horizon Invesco DWA Industrials is expected to generate 2.02 times more return on investment than Global X. However, Invesco DWA is 2.02 times more volatile than Global X Aging. It trades about 0.2 of its potential returns per unit of risk. Global X Aging is currently generating about -0.11 per unit of risk. If you would invest  14,262  in Invesco DWA Industrials on September 12, 2024 and sell it today you would earn a total of  2,588  from holding Invesco DWA Industrials or generate 18.15% return on investment over 90 days.

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

Invesco DWA Industrials  vs.  Global X Aging

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.

Global X Aging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Aging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Global X is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco DWA and Global X

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

The idea behind Invesco DWA Industrials and Global X Aging 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.