Correlation Between Invesco ESG and Invesco 1

Can any of the company-specific risk be diversified away by investing in both Invesco ESG and Invesco 1 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 ESG and Invesco 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco ESG NASDAQ and Invesco 1 5 Year, you can compare the effects of market volatilities on Invesco ESG and Invesco 1 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 ESG with a short position of Invesco 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco ESG and Invesco 1.

Diversification Opportunities for Invesco ESG and Invesco 1

0.83

Correlation Coefficient

Invesco ESG  Invesco 1

Very poor diversification

The 3 months correlation between Invesco and Invesco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Invesco ESG NASDAQ and Invesco 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco 1 5 and Invesco ESG 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 ESG NASDAQ are associated (or correlated) with Invesco 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco 1 5 has no effect on the direction of Invesco ESG i.e., Invesco ESG and Invesco 1 go up and down completely randomly.

Pair Corralation between Invesco ESG and Invesco 1

Assuming the 90 days trading horizon Invesco ESG NASDAQ is expected to generate 3.06 times more return on investment than Invesco 1. However, Invesco ESG is 3.06 times more volatile than Invesco 1 5 Year. It trades about 0.12 of its potential returns per unit of risk. Invesco 1 5 Year is currently generating about 0.05 per unit of risk. If you would invest  2,096  in Invesco ESG NASDAQ on October 22, 2024 and sell it today you would earn a total of  26.00  from holding Invesco ESG NASDAQ or generate 1.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.44%
Values	Daily Returns

Invesco ESG NASDAQ  vs.  Invesco 1 5 Year

Invesco ESG NASDAQ

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco ESG NASDAQ are ranked lower than 7 (%) 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.

Invesco 1 5

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco 1 5 Year are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Invesco 1 is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco ESG and Invesco 1

The main advantage of trading using opposite Invesco ESG and Invesco 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco ESG position performs unexpectedly, Invesco 1 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 1 will offset losses from the drop in Invesco 1's long position.

The idea behind Invesco ESG NASDAQ and Invesco 1 5 Year 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.