Correlation Between Invesco FTSE and EcoSynthetix

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

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

Diversification Opportunities for Invesco FTSE and EcoSynthetix

-0.74

Correlation Coefficient

Invesco FTSE  EcoSynthetix

Pay attention - limited upside

The 3 months correlation between Invesco and EcoSynthetix is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and EcoSynthetix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EcoSynthetix and Invesco FTSE 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 FTSE RAFI are associated (or correlated) with EcoSynthetix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EcoSynthetix has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and EcoSynthetix go up and down completely randomly.

Pair Corralation between Invesco FTSE and EcoSynthetix

Assuming the 90 days trading horizon Invesco FTSE RAFI is expected to generate 0.25 times more return on investment than EcoSynthetix. However, Invesco FTSE RAFI is 3.96 times less risky than EcoSynthetix. It trades about 0.08 of its potential returns per unit of risk. EcoSynthetix is currently generating about 0.02 per unit of risk. If you would invest  3,339  in Invesco FTSE RAFI on October 11, 2024 and sell it today you would earn a total of  914.00  from holding Invesco FTSE RAFI or generate 27.37% return on investment over 90 days.

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

Invesco FTSE RAFI  vs.  EcoSynthetix

Invesco FTSE RAFI

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco FTSE RAFI are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Invesco FTSE is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

EcoSynthetix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EcoSynthetix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Invesco FTSE and EcoSynthetix

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

The idea behind Invesco FTSE RAFI and EcoSynthetix 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.