Correlation Between Invesco DWA and Amplify Thematic

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

Diversification Opportunities for Invesco DWA and Amplify Thematic

0.62

Correlation Coefficient

Invesco DWA  Amplify Thematic

Poor diversification

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

Pair Corralation between Invesco DWA and Amplify Thematic

Considering the 90-day investment horizon Invesco DWA is expected to generate 9.4 times less return on investment than Amplify Thematic. But when comparing it to its historical volatility, Invesco DWA Utilities is 1.3 times less risky than Amplify Thematic. It trades about 0.03 of its potential returns per unit of risk. Amplify Thematic All Stars is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,126  in Amplify Thematic All Stars on September 17, 2024 and sell it today you would earn a total of  419.00  from holding Amplify Thematic All Stars or generate 19.71% return on investment over 90 days.

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

Invesco DWA Utilities  vs.  Amplify Thematic All Stars

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.

Amplify Thematic All

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amplify Thematic All Stars are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Amplify Thematic unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco DWA and Amplify Thematic

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

The idea behind Invesco DWA Utilities and Amplify Thematic All Stars 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.