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 Utilities and Global X Artificial, 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

0.55

Correlation Coefficient

Invesco DWA  Global X

Very weak diversification

The 3 months correlation between Invesco and Global is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Utilities and Global X Artificial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Artificial 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 Utilities 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 Artificial 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 Utilities is expected to under-perform the Global X. In addition to that, Invesco DWA is 1.22 times more volatile than Global X Artificial. It trades about -0.12 of its total potential returns per unit of risk. Global X Artificial is currently generating about 0.41 per unit of volatility. If you would invest  3,773  in Global X Artificial on September 16, 2024 and sell it today you would earn a total of  241.00  from holding Global X Artificial or generate 6.39% return on investment over 90 days.

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

Invesco DWA Utilities  vs.  Global X Artificial

Invesco DWA Utilities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Utilities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Invesco DWA is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Global X Artificial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Artificial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward indicators, Global X reported solid returns over the last few months and may actually be approaching a breakup point.

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 Utilities and Global X Artificial 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.