Correlation Between Invesco Select and Iaadx

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

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

Diversification Opportunities for Invesco Select and Iaadx

0.11

Correlation Coefficient

Invesco Select  Iaadx

Average diversification

The 3 months correlation between Invesco and Iaadx is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Select Risk and Iaadx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iaadx and Invesco Select 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 Select Risk are associated (or correlated) with Iaadx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iaadx has no effect on the direction of Invesco Select i.e., Invesco Select and Iaadx go up and down completely randomly.

Pair Corralation between Invesco Select and Iaadx

Assuming the 90 days horizon Invesco Select Risk is expected to under-perform the Iaadx. In addition to that, Invesco Select is 2.45 times more volatile than Iaadx. It trades about -0.01 of its total potential returns per unit of risk. Iaadx is currently generating about 0.21 per unit of volatility. If you would invest  899.00  in Iaadx on December 21, 2024 and sell it today you would earn a total of  26.00  from holding Iaadx or generate 2.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Invesco Select Risk  vs.  Iaadx

Invesco Select Risk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Select Risk has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Invesco Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Iaadx

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Iaadx are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Iaadx is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco Select and Iaadx

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

The idea behind Invesco Select Risk and Iaadx 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.