Correlation Between Invesco EURO and Invesco Morningstar

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

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

Diversification Opportunities for Invesco EURO and Invesco Morningstar

0.67

Correlation Coefficient

Invesco EURO  Invesco Morningstar

Poor diversification

The 3 months correlation between Invesco and Invesco is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Invesco EURO STOXX and Invesco Morningstar Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Morningstar and Invesco EURO 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 EURO STOXX are associated (or correlated) with Invesco Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Morningstar has no effect on the direction of Invesco EURO i.e., Invesco EURO and Invesco Morningstar go up and down completely randomly.

Pair Corralation between Invesco EURO and Invesco Morningstar

Assuming the 90 days trading horizon Invesco EURO STOXX is expected to generate 1.35 times more return on investment than Invesco Morningstar. However, Invesco EURO is 1.35 times more volatile than Invesco Morningstar Energy. It trades about 0.32 of its potential returns per unit of risk. Invesco Morningstar Energy is currently generating about 0.14 per unit of risk. If you would invest  869,250  in Invesco EURO STOXX on December 24, 2024 and sell it today you would earn a total of  317,950  from holding Invesco EURO STOXX or generate 36.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Invesco EURO STOXX  vs.  Invesco Morningstar Energy

Invesco EURO STOXX

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco EURO STOXX are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Invesco EURO unveiled solid returns over the last few months and may actually be approaching a breakup point.

Invesco Morningstar

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Morningstar Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Invesco Morningstar may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Invesco EURO and Invesco Morningstar

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

The idea behind Invesco EURO STOXX and Invesco Morningstar Energy 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.