Correlation Between Invesco FTSE and Invesco Canadian

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

Diversification Opportunities for Invesco FTSE and Invesco Canadian

0.89

Correlation Coefficient

Invesco FTSE  Invesco Canadian

Very poor diversification

The 3 months correlation between Invesco and Invesco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and Invesco Canadian Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Canadian Dividend 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 Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Canadian Dividend has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and Invesco Canadian go up and down completely randomly.

Pair Corralation between Invesco FTSE and Invesco Canadian

Assuming the 90 days trading horizon Invesco FTSE is expected to generate 1.43 times less return on investment than Invesco Canadian. In addition to that, Invesco FTSE is 1.76 times more volatile than Invesco Canadian Dividend. It trades about 0.14 of its total potential returns per unit of risk. Invesco Canadian Dividend is currently generating about 0.35 per unit of volatility. If you would invest  3,199  in Invesco Canadian Dividend on September 3, 2024 and sell it today you would earn a total of  312.00  from holding Invesco Canadian Dividend or generate 9.75% return on investment over 90 days.

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

Invesco FTSE RAFI  vs.  Invesco Canadian Dividend

Invesco FTSE RAFI

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco FTSE RAFI are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Invesco FTSE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco Canadian Dividend

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Canadian Dividend are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Invesco Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco FTSE and Invesco Canadian

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

The idea behind Invesco FTSE RAFI and Invesco Canadian Dividend 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.