Correlation Between AIM ETF and Invesco DWA

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

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

Diversification Opportunities for AIM ETF and Invesco DWA

-0.07

Correlation Coefficient

AIM ETF  Invesco DWA

Good diversification

The 3 months correlation between AIM and Invesco is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding AIM ETF Products and Invesco DWA Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Technology and AIM ETF 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 AIM ETF Products 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 Technology has no effect on the direction of AIM ETF i.e., AIM ETF and Invesco DWA go up and down completely randomly.

Pair Corralation between AIM ETF and Invesco DWA

Given the investment horizon of 90 days AIM ETF Products is expected to generate 0.22 times more return on investment than Invesco DWA. However, AIM ETF Products is 4.58 times less risky than Invesco DWA. It trades about -0.1 of its potential returns per unit of risk. Invesco DWA Technology is currently generating about -0.07 per unit of risk. If you would invest  2,697  in AIM ETF Products on October 6, 2024 and sell it today you would lose (26.00) from holding AIM ETF Products or give up 0.96% of portfolio value over 90 days.

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

AIM ETF Products  vs.  Invesco DWA Technology

AIM ETF Products

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AIM ETF Products are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, AIM ETF is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco DWA Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Invesco DWA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIM ETF and Invesco DWA

The main advantage of trading using opposite AIM ETF and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIM ETF 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 AIM ETF Products and Invesco DWA Technology 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.