Correlation Between Invesco DWA and Horizon Kinetics

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

By analyzing existing cross correlation between Invesco DWA Consumer and Horizon Kinetics SPAC, you can compare the effects of market volatilities on Invesco DWA and Horizon Kinetics 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 Horizon Kinetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DWA and Horizon Kinetics.

Diversification Opportunities for Invesco DWA and Horizon Kinetics

0.69

Correlation Coefficient

Invesco DWA  Horizon Kinetics

Poor diversification

The 3 months correlation between Invesco and Horizon is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Consumer and Horizon Kinetics SPAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Kinetics SPAC 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 Consumer are associated (or correlated) with Horizon Kinetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Kinetics SPAC has no effect on the direction of Invesco DWA i.e., Invesco DWA and Horizon Kinetics go up and down completely randomly.

Pair Corralation between Invesco DWA and Horizon Kinetics

Considering the 90-day investment horizon Invesco DWA Consumer is expected to generate 6.1 times more return on investment than Horizon Kinetics. However, Invesco DWA is 6.1 times more volatile than Horizon Kinetics SPAC. It trades about 0.21 of its potential returns per unit of risk. Horizon Kinetics SPAC is currently generating about 0.38 per unit of risk. If you would invest  10,531  in Invesco DWA Consumer on September 19, 2024 and sell it today you would earn a total of  308.00  from holding Invesco DWA Consumer or generate 2.92% return on investment over 90 days.

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

Invesco DWA Consumer  vs.  Horizon Kinetics SPAC

Invesco DWA Consumer

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Consumer are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Invesco DWA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Horizon Kinetics SPAC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Kinetics SPAC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Horizon Kinetics 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 Invesco DWA and Horizon Kinetics

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

The idea behind Invesco DWA Consumer and Horizon Kinetics SPAC 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.