Correlation Between Invesco SP and Dimensional International

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

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

Diversification Opportunities for Invesco SP and Dimensional International

0.37

Correlation Coefficient

Invesco SP  Dimensional International

Weak diversification

The 3 months correlation between Invesco and Dimensional is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP MidCap and Dimensional International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional International and Invesco SP 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 SP MidCap are associated (or correlated) with Dimensional International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional International has no effect on the direction of Invesco SP i.e., Invesco SP and Dimensional International go up and down completely randomly.

Pair Corralation between Invesco SP and Dimensional International

Given the investment horizon of 90 days Invesco SP MidCap is expected to under-perform the Dimensional International. In addition to that, Invesco SP is 1.42 times more volatile than Dimensional International High. It trades about -0.15 of its total potential returns per unit of risk. Dimensional International High is currently generating about 0.14 per unit of volatility. If you would invest  2,575  in Dimensional International High on November 27, 2024 and sell it today you would earn a total of  158.00  from holding Dimensional International High or generate 6.14% return on investment over 90 days.

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

Invesco SP MidCap  vs.  Dimensional International High

Invesco SP MidCap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP MidCap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's primary indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Dimensional International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional International High are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Dimensional International may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Invesco SP and Dimensional International

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

The idea behind Invesco SP MidCap and Dimensional International High 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.