Correlation Between Invesco DWA and Select STOXX
Can any of the company-specific risk be diversified away by investing in both Invesco DWA and Select STOXX 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 Select STOXX 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 Select STOXX Europe, you can compare the effects of market volatilities on Invesco DWA and Select STOXX 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 Select STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DWA and Select STOXX.
Diversification Opportunities for Invesco DWA and Select STOXX
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Invesco and Select is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Utilities and Select STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select STOXX Europe 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 Select STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select STOXX Europe has no effect on the direction of Invesco DWA i.e., Invesco DWA and Select STOXX go up and down completely randomly.
Pair Corralation between Invesco DWA and Select STOXX
Considering the 90-day investment horizon Invesco DWA is expected to generate 7.38 times less return on investment than Select STOXX. But when comparing it to its historical volatility, Invesco DWA Utilities is 1.91 times less risky than Select STOXX. It trades about 0.08 of its potential returns per unit of risk. Select STOXX Europe is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 2,440 in Select STOXX Europe on December 28, 2024 and sell it today you would earn a total of 994.00 from holding Select STOXX Europe or generate 40.74% 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. Select STOXX Europe
Performance |
Timeline |
Invesco DWA Utilities |
Select STOXX Europe |
Invesco DWA and Select STOXX Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Invesco DWA and Select STOXX
The main advantage of trading using opposite Invesco DWA and Select STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DWA position performs unexpectedly, Select STOXX 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 Select STOXX will offset losses from the drop in Select STOXX's long position.Invesco DWA vs. Invesco DWA Consumer | Invesco DWA vs. Invesco DWA Basic | Invesco DWA vs. Invesco Dynamic Large |
Select STOXX vs. Industrial Select Sector | Select STOXX vs. Driven Brands Holdings | Select STOXX vs. iShares Aerospace Defense | Select STOXX vs. Vanguard Industrials Index |
Check out your portfolio center.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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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