Correlation Between Invesco Short and Scharf Global

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

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

Diversification Opportunities for Invesco Short and Scharf Global

0.14

Correlation Coefficient

Invesco Short  Scharf Global

Average diversification

The 3 months correlation between Invesco and Scharf is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Short Term and Scharf Global Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scharf Global Opportunity and Invesco Short 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 Short Term are associated (or correlated) with Scharf Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scharf Global Opportunity has no effect on the direction of Invesco Short i.e., Invesco Short and Scharf Global go up and down completely randomly.

Pair Corralation between Invesco Short and Scharf Global

Assuming the 90 days horizon Invesco Short is expected to generate 1.34 times less return on investment than Scharf Global. But when comparing it to its historical volatility, Invesco Short Term is 4.54 times less risky than Scharf Global. It trades about 0.15 of its potential returns per unit of risk. Scharf Global Opportunity is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,215  in Scharf Global Opportunity on September 21, 2024 and sell it today you would earn a total of  256.00  from holding Scharf Global Opportunity or generate 7.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

Invesco Short Term  vs.  Scharf Global Opportunity

Invesco Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

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

Scharf Global Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Invesco Short and Scharf Global

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

The idea behind Invesco Short Term and Scharf Global Opportunity 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.