Correlation Between Technology Fund and Invesco Technology

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

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

Diversification Opportunities for Technology Fund and Invesco Technology

0.73

Correlation Coefficient

Technology Fund  Invesco Technology

Poor diversification

The 3 months correlation between Technology and Invesco is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Technology Fund Class and Invesco Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Technology and Technology Fund 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 Technology Fund Class are associated (or correlated) with Invesco Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Technology has no effect on the direction of Technology Fund i.e., Technology Fund and Invesco Technology go up and down completely randomly.

Pair Corralation between Technology Fund and Invesco Technology

Assuming the 90 days horizon Technology Fund Class is expected to generate 0.84 times more return on investment than Invesco Technology. However, Technology Fund Class is 1.19 times less risky than Invesco Technology. It trades about -0.09 of its potential returns per unit of risk. Invesco Technology Fund is currently generating about -0.13 per unit of risk. If you would invest  19,146  in Technology Fund Class on December 24, 2024 and sell it today you would lose (1,855) from holding Technology Fund Class or give up 9.69% of portfolio value over 90 days.

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

Technology Fund Class  vs.  Invesco Technology Fund

Technology Fund Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Technology Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Invesco Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Technology Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Technology Fund and Invesco Technology

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

The idea behind Technology Fund Class and Invesco Technology Fund 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.