Correlation Between Invesco DWA and Vanguard Health

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

Diversification Opportunities for Invesco DWA and Vanguard Health

-0.67

Correlation Coefficient

Invesco DWA  Vanguard Health

Excellent diversification

The 3 months correlation between Invesco and Vanguard is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Industrials and Vanguard Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Health Care 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 Vanguard Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Health Care has no effect on the direction of Invesco DWA i.e., Invesco DWA and Vanguard Health go up and down completely randomly.

Pair Corralation between Invesco DWA and Vanguard Health

Considering the 90-day investment horizon Invesco DWA Industrials is expected to under-perform the Vanguard Health. In addition to that, Invesco DWA is 1.73 times more volatile than Vanguard Health Care. It trades about -0.19 of its total potential returns per unit of risk. Vanguard Health Care is currently generating about -0.08 per unit of volatility. If you would invest  26,078  in Vanguard Health Care on September 19, 2024 and sell it today you would lose (286.00) from holding Vanguard Health Care or give up 1.1% of portfolio value over 90 days.

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

Invesco DWA Industrials  vs.  Vanguard Health Care

Invesco DWA Industrials

Risk-Adjusted Performance

8 of 100

OK

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

Vanguard Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Invesco DWA and Vanguard Health

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

The idea behind Invesco DWA Industrials and Vanguard Health Care 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.