Correlation Between Invesco Active and Invesco KBW

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Can any of the company-specific risk be diversified away by investing in both Invesco Active and Invesco KBW 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 Active and Invesco KBW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Active Real and Invesco KBW Premium, you can compare the effects of market volatilities on Invesco Active and Invesco KBW 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 Active with a short position of Invesco KBW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Active and Invesco KBW.

Diversification Opportunities for Invesco Active and Invesco KBW

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Invesco and Invesco is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Active Real and Invesco KBW Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco KBW Premium and Invesco Active 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 Active Real are associated (or correlated) with Invesco KBW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco KBW Premium has no effect on the direction of Invesco Active i.e., Invesco Active and Invesco KBW go up and down completely randomly.

Pair Corralation between Invesco Active and Invesco KBW

Considering the 90-day investment horizon Invesco Active Real is expected to generate 1.05 times more return on investment than Invesco KBW. However, Invesco Active is 1.05 times more volatile than Invesco KBW Premium. It trades about 0.04 of its potential returns per unit of risk. Invesco KBW Premium is currently generating about -0.09 per unit of risk. If you would invest  9,557  in Invesco Active Real on September 5, 2024 and sell it today you would earn a total of  133.00  from holding Invesco Active Real or generate 1.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Invesco Active Real  vs.  Invesco KBW Premium

 Performance 
       Timeline  
Invesco Active Real 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Active Real are ranked lower than 2 (%) 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 latest stock price agitation, may contribute to short-term losses for the retail investors.
Invesco KBW Premium 

Risk-Adjusted Performance

0 of 100

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

Invesco Active and Invesco KBW Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Invesco Active and Invesco KBW

The main advantage of trading using opposite Invesco Active and Invesco KBW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Active position performs unexpectedly, Invesco KBW 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 KBW will offset losses from the drop in Invesco KBW's long position.
The idea behind Invesco Active Real and Invesco KBW Premium 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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