Correlation Between Invesco Dynamic and Invesco FTSE

Can any of the company-specific risk be diversified away by investing in both Invesco Dynamic and Invesco FTSE 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 Dynamic and Invesco FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco Dynamic Large and Invesco FTSE RAFI, you can compare the effects of market volatilities on Invesco Dynamic and Invesco FTSE 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 Dynamic with a short position of Invesco FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Dynamic and Invesco FTSE.

Diversification Opportunities for Invesco Dynamic and Invesco FTSE

0.85

Correlation Coefficient

Invesco Dynamic  Invesco FTSE

Very poor diversification

The 3 months correlation between Invesco and Invesco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Large and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI and Invesco Dynamic 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 Dynamic Large are associated (or correlated) with Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of Invesco Dynamic i.e., Invesco Dynamic and Invesco FTSE go up and down completely randomly.

Pair Corralation between Invesco Dynamic and Invesco FTSE

Considering the 90-day investment horizon Invesco Dynamic Large is expected to under-perform the Invesco FTSE. In addition to that, Invesco Dynamic is 1.74 times more volatile than Invesco FTSE RAFI. It trades about -0.04 of its total potential returns per unit of risk. Invesco FTSE RAFI is currently generating about 0.0 per unit of volatility. If you would invest  4,007  in Invesco FTSE RAFI on December 29, 2024 and sell it today you would lose (2.00) from holding Invesco FTSE RAFI or give up 0.05% of portfolio value over 90 days.

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

Invesco Dynamic Large  vs.  Invesco FTSE RAFI

Invesco Dynamic Large

Risk-Adjusted Performance

Very Weak

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

Invesco FTSE RAFI

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco FTSE RAFI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Invesco FTSE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco Dynamic and Invesco FTSE

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

The idea behind Invesco Dynamic Large and Invesco FTSE RAFI 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.