Correlation Between Smith Nephew and Invesco Dynamic

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

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

Diversification Opportunities for Smith Nephew and Invesco Dynamic

-0.9

Correlation Coefficient

Smith Nephew  Invesco Dynamic

Pay attention - limited upside

The 3 months correlation between Smith and Invesco is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Smith Nephew SNATS and Invesco Dynamic Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Leisure and Smith Nephew 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 Smith Nephew SNATS are associated (or correlated) with Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Leisure has no effect on the direction of Smith Nephew i.e., Smith Nephew and Invesco Dynamic go up and down completely randomly.

Pair Corralation between Smith Nephew and Invesco Dynamic

Considering the 90-day investment horizon Smith Nephew SNATS is expected to under-perform the Invesco Dynamic. In addition to that, Smith Nephew is 2.21 times more volatile than Invesco Dynamic Leisure. It trades about -0.13 of its total potential returns per unit of risk. Invesco Dynamic Leisure is currently generating about 0.31 per unit of volatility. If you would invest  4,528  in Invesco Dynamic Leisure on September 5, 2024 and sell it today you would earn a total of  894.00  from holding Invesco Dynamic Leisure or generate 19.74% return on investment over 90 days.

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

Smith Nephew SNATS  vs.  Invesco Dynamic Leisure

Smith Nephew SNATS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smith Nephew SNATS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Invesco Dynamic Leisure

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Leisure are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Invesco Dynamic revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smith Nephew and Invesco Dynamic

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

The idea behind Smith Nephew SNATS and Invesco Dynamic Leisure 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.