Correlation Between Invesco DWA and Invesco Dividend

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

Diversification Opportunities for Invesco DWA and Invesco Dividend

0.88

Correlation Coefficient

Invesco DWA  Invesco Dividend

Very poor diversification

The 3 months correlation between Invesco and Invesco is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Utilities and Invesco Dividend Achievers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dividend Ach 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 Invesco Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dividend Ach has no effect on the direction of Invesco DWA i.e., Invesco DWA and Invesco Dividend go up and down completely randomly.

Pair Corralation between Invesco DWA and Invesco Dividend

Considering the 90-day investment horizon Invesco DWA Utilities is expected to generate 1.55 times more return on investment than Invesco Dividend. However, Invesco DWA is 1.55 times more volatile than Invesco Dividend Achievers. It trades about 0.17 of its potential returns per unit of risk. Invesco Dividend Achievers is currently generating about 0.16 per unit of risk. If you would invest  3,780  in Invesco DWA Utilities on September 3, 2024 and sell it today you would earn a total of  391.00  from holding Invesco DWA Utilities or generate 10.34% return on investment over 90 days.

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

Invesco DWA Utilities  vs.  Invesco Dividend Achievers

Invesco DWA Utilities

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Utilities are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Invesco DWA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco Dividend Ach

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dividend Achievers are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Invesco Dividend may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco DWA and Invesco Dividend

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

The idea behind Invesco DWA Utilities and Invesco Dividend Achievers 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.