Correlation Between Invesco Steelpath and Royce Opportunity

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

By analyzing existing cross correlation between Invesco Steelpath Mlp and Royce Opportunity Fund, you can compare the effects of market volatilities on Invesco Steelpath and Royce Opportunity 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 Steelpath with a short position of Royce Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Steelpath and Royce Opportunity.

Diversification Opportunities for Invesco Steelpath and Royce Opportunity

0.87

Correlation Coefficient

Invesco Steelpath  Royce Opportunity

Very poor diversification

The 3 months correlation between Invesco and ROYCE is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Steelpath Mlp and Royce Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Opportunity and Invesco Steelpath 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 Steelpath Mlp are associated (or correlated) with Royce Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Opportunity has no effect on the direction of Invesco Steelpath i.e., Invesco Steelpath and Royce Opportunity go up and down completely randomly.

Pair Corralation between Invesco Steelpath and Royce Opportunity

Assuming the 90 days horizon Invesco Steelpath Mlp is expected to generate 0.8 times more return on investment than Royce Opportunity. However, Invesco Steelpath Mlp is 1.24 times less risky than Royce Opportunity. It trades about 0.48 of its potential returns per unit of risk. Royce Opportunity Fund is currently generating about 0.37 per unit of risk. If you would invest  548.00  in Invesco Steelpath Mlp on September 4, 2024 and sell it today you would earn a total of  79.00  from holding Invesco Steelpath Mlp or generate 14.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Invesco Steelpath Mlp  vs.  Royce Opportunity Fund

Invesco Steelpath Mlp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Steelpath Mlp are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking indicators, Invesco Steelpath showed solid returns over the last few months and may actually be approaching a breakup point.

Royce Opportunity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Opportunity Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Royce Opportunity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Steelpath and Royce Opportunity

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

The idea behind Invesco Steelpath Mlp and Royce Opportunity Fund 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.