Correlation Between Sentinel Common and Invesco Disciplined

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

By analyzing existing cross correlation between Sentinel Mon Stock and Invesco Disciplined Equity, you can compare the effects of market volatilities on Sentinel Common and Invesco Disciplined 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 Sentinel Common with a short position of Invesco Disciplined. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sentinel Common and Invesco Disciplined.

Diversification Opportunities for Sentinel Common and Invesco Disciplined

0.37

Correlation Coefficient

Sentinel Common  Invesco Disciplined

Weak diversification

The 3 months correlation between Sentinel and Invesco is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Mon Stock and Invesco Disciplined Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Disciplined and Sentinel Common 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 Sentinel Mon Stock are associated (or correlated) with Invesco Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Disciplined has no effect on the direction of Sentinel Common i.e., Sentinel Common and Invesco Disciplined go up and down completely randomly.

Pair Corralation between Sentinel Common and Invesco Disciplined

Assuming the 90 days horizon Sentinel Mon Stock is expected to generate 1.11 times more return on investment than Invesco Disciplined. However, Sentinel Common is 1.11 times more volatile than Invesco Disciplined Equity. It trades about -0.06 of its potential returns per unit of risk. Invesco Disciplined Equity is currently generating about -0.07 per unit of risk. If you would invest  7,181  in Sentinel Mon Stock on December 21, 2024 and sell it today you would lose (254.00) from holding Sentinel Mon Stock or give up 3.54% of portfolio value over 90 days.

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

Sentinel Mon Stock  vs.  Invesco Disciplined Equity

Sentinel Mon Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sentinel Mon Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sentinel Common is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Disciplined

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Disciplined Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Invesco Disciplined is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sentinel Common and Invesco Disciplined

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

The idea behind Sentinel Mon Stock and Invesco Disciplined Equity 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.