Correlation Between Invesco FTSE and Invesco ESG

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

Diversification Opportunities for Invesco FTSE and Invesco ESG

0.46

Correlation Coefficient

Invesco FTSE  Invesco ESG

Very weak diversification

The 3 months correlation between Invesco and Invesco is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and Invesco ESG NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco ESG NASDAQ 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 ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco ESG NASDAQ has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and Invesco ESG go up and down completely randomly.

Pair Corralation between Invesco FTSE and Invesco ESG

Assuming the 90 days trading horizon Invesco FTSE RAFI is expected to under-perform the Invesco ESG. But the etf apears to be less risky and, when comparing its historical volatility, Invesco FTSE RAFI is 1.77 times less risky than Invesco ESG. The etf trades about -0.01 of its potential returns per unit of risk. The Invesco ESG NASDAQ is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,944  in Invesco ESG NASDAQ on October 7, 2024 and sell it today you would earn a total of  202.00  from holding Invesco ESG NASDAQ or generate 10.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Invesco FTSE RAFI  vs.  Invesco ESG NASDAQ

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. In spite of comparatively stable basic indicators, Invesco FTSE is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco ESG NASDAQ

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco ESG NASDAQ are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Invesco ESG may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Invesco FTSE and Invesco ESG

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

The idea behind Invesco FTSE RAFI and Invesco ESG NASDAQ 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.