Correlation Between Invesco Physical and European Metals

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

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

Diversification Opportunities for Invesco Physical and European Metals

-0.45

Correlation Coefficient

Invesco Physical  European Metals

Very good diversification

The 3 months correlation between Invesco and European is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Physical Gold and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings and Invesco Physical 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 Physical Gold are associated (or correlated) with European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of Invesco Physical i.e., Invesco Physical and European Metals go up and down completely randomly.

Pair Corralation between Invesco Physical and European Metals

Assuming the 90 days trading horizon Invesco Physical Gold is expected to generate 0.27 times more return on investment than European Metals. However, Invesco Physical Gold is 3.68 times less risky than European Metals. It trades about 0.18 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.1 per unit of risk. If you would invest  25,575  in Invesco Physical Gold on December 4, 2024 and sell it today you would earn a total of  2,270  from holding Invesco Physical Gold or generate 8.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Invesco Physical Gold  vs.  European Metals Holdings

Invesco Physical Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Physical Gold are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Invesco Physical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

European Metals Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days European Metals Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Invesco Physical and European Metals

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

The idea behind Invesco Physical Gold and European Metals Holdings 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.