Correlation Between Invesco DWA and Goldman Sachs

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

Diversification Opportunities for Invesco DWA and Goldman Sachs

0.33

Correlation Coefficient

Invesco DWA  Goldman Sachs

Weak diversification

The 3 months correlation between Invesco and Goldman is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Utilities and Goldman Sachs Innovate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Innovate 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Innovate has no effect on the direction of Invesco DWA i.e., Invesco DWA and Goldman Sachs go up and down completely randomly.

Pair Corralation between Invesco DWA and Goldman Sachs

Considering the 90-day investment horizon Invesco DWA Utilities is expected to generate 0.9 times more return on investment than Goldman Sachs. However, Invesco DWA Utilities is 1.11 times less risky than Goldman Sachs. It trades about 0.08 of its potential returns per unit of risk. Goldman Sachs Innovate is currently generating about -0.03 per unit of risk. If you would invest  3,849  in Invesco DWA Utilities on December 28, 2024 and sell it today you would earn a total of  176.00  from holding Invesco DWA Utilities or generate 4.57% return on investment over 90 days.

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

Invesco DWA Utilities  vs.  Goldman Sachs Innovate

Invesco DWA Utilities

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Utilities are ranked lower than 5 (%) 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.

Goldman Sachs Innovate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs Innovate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Goldman Sachs is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco DWA and Goldman Sachs

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

The idea behind Invesco DWA Utilities and Goldman Sachs Innovate 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.