Correlation Between Invesco DWA and XWEB

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

Diversification Opportunities for Invesco DWA and XWEB

0.0

Correlation Coefficient

Invesco DWA  XWEB

Pay attention - limited upside

The 3 months correlation between Invesco and XWEB is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Utilities and XWEB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XWEB 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 XWEB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XWEB has no effect on the direction of Invesco DWA i.e., Invesco DWA and XWEB go up and down completely randomly.

Pair Corralation between Invesco DWA and XWEB

If you would invest  3,893  in Invesco DWA Utilities on December 26, 2024 and sell it today you would earn a total of  142.00  from holding Invesco DWA Utilities or generate 3.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Invesco DWA Utilities  vs.  XWEB

Invesco DWA Utilities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Utilities are ranked lower than 4 (%) 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.

XWEB

Risk-Adjusted Performance

Very Weak

Over the last 90 days XWEB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, XWEB is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco DWA and XWEB

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

The idea behind Invesco DWA Utilities and XWEB 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.