Correlation Between Defiance Quantum and Invesco DWA

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

By analyzing existing cross correlation between Defiance Quantum ETF and Invesco DWA Utilities, you can compare the effects of market volatilities on Defiance Quantum and Invesco DWA 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 Defiance Quantum with a short position of Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defiance Quantum and Invesco DWA.

Diversification Opportunities for Defiance Quantum and Invesco DWA

-0.41

Correlation Coefficient

Defiance Quantum  Invesco DWA

Very good diversification

The 3 months correlation between Defiance and Invesco is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Defiance Quantum ETF and Invesco DWA Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Utilities and Defiance Quantum 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 Defiance Quantum ETF are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Utilities has no effect on the direction of Defiance Quantum i.e., Defiance Quantum and Invesco DWA go up and down completely randomly.

Pair Corralation between Defiance Quantum and Invesco DWA

Given the investment horizon of 90 days Defiance Quantum ETF is expected to generate 1.91 times more return on investment than Invesco DWA. However, Defiance Quantum is 1.91 times more volatile than Invesco DWA Utilities. It trades about 0.15 of its potential returns per unit of risk. Invesco DWA Utilities is currently generating about 0.05 per unit of risk. If you would invest  5,740  in Defiance Quantum ETF on December 5, 2024 and sell it today you would earn a total of  2,209  from holding Defiance Quantum ETF or generate 38.48% return on investment over 90 days.

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

Defiance Quantum ETF  vs.  Invesco DWA Utilities

Defiance Quantum ETF

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Quantum ETF are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Defiance Quantum may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Invesco DWA Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco DWA Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Invesco DWA is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Defiance Quantum and Invesco DWA

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

The idea behind Defiance Quantum ETF and Invesco DWA Utilities 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.