Correlation Between Invesco FTSE and Invesco DWA

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

Diversification Opportunities for Invesco FTSE and Invesco DWA

0.13

Correlation Coefficient

Invesco FTSE  Invesco DWA

Average diversification

The 3 months correlation between Invesco and Invesco is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and Invesco DWA Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Developed 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 Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Developed has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and Invesco DWA go up and down completely randomly.

Pair Corralation between Invesco FTSE and Invesco DWA

Considering the 90-day investment horizon Invesco FTSE RAFI is expected to under-perform the Invesco DWA. But the etf apears to be less risky and, when comparing its historical volatility, Invesco FTSE RAFI is 1.14 times less risky than Invesco DWA. The etf trades about -0.07 of its potential returns per unit of risk. The Invesco DWA Developed is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,704  in Invesco DWA Developed on September 15, 2024 and sell it today you would earn a total of  97.00  from holding Invesco DWA Developed or generate 2.62% return on investment over 90 days.

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

Invesco FTSE RAFI  vs.  Invesco DWA Developed

Invesco FTSE RAFI

Risk-Adjusted Performance

0 of 100

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Invesco DWA Developed

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Developed are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Invesco DWA 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 FTSE and Invesco DWA

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

The idea behind Invesco FTSE RAFI and Invesco DWA Developed 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 Commodity Directory module to find actively traded commodities issued by global exchanges.