Correlation Between Invesco Active and US Diversified

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

Diversification Opportunities for Invesco Active and US Diversified

0.62

Correlation Coefficient

Invesco Active  US Diversified

Poor diversification

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

Pair Corralation between Invesco Active and US Diversified

Considering the 90-day investment horizon Invesco Active Real is expected to generate 1.02 times more return on investment than US Diversified. However, Invesco Active is 1.02 times more volatile than US Diversified Real. It trades about 0.06 of its potential returns per unit of risk. US Diversified Real is currently generating about -0.01 per unit of risk. 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

Invesco Active Real  vs.  US Diversified Real

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.

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.

Pair Trading with Invesco Active and US Diversified

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

The idea behind Invesco Active Real and US Diversified 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..