Correlation Between Invesco FTSE and Desjardins American

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

Diversification Opportunities for Invesco FTSE and Desjardins American

0.85

Correlation Coefficient

Invesco FTSE  Desjardins American

Very poor diversification

The 3 months correlation between Invesco and Desjardins is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and Desjardins American Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins American 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 Desjardins American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins American has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and Desjardins American go up and down completely randomly.

Pair Corralation between Invesco FTSE and Desjardins American

Assuming the 90 days trading horizon Invesco FTSE is expected to generate 2.46 times less return on investment than Desjardins American. In addition to that, Invesco FTSE is 1.13 times more volatile than Desjardins American Equity. It trades about 0.06 of its total potential returns per unit of risk. Desjardins American Equity is currently generating about 0.17 per unit of volatility. If you would invest  1,969  in Desjardins American Equity on October 9, 2024 and sell it today you would earn a total of  506.00  from holding Desjardins American Equity or generate 25.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	36.44%
Values	Daily Returns

Invesco FTSE RAFI  vs.  Desjardins American Equity

Invesco FTSE RAFI

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco FTSE RAFI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Invesco FTSE is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Desjardins American

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins American Equity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Desjardins American may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Invesco FTSE and Desjardins American

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

The idea behind Invesco FTSE RAFI and Desjardins American Equity 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 Transaction History module to view history of all your transactions and understand their impact on performance.