Correlation Between SWK Holdings and Invesco Trust

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

By analyzing existing cross correlation between SWK Holdings Corp and Invesco Trust For, you can compare the effects of market volatilities on SWK Holdings and Invesco Trust 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 SWK Holdings with a short position of Invesco Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWK Holdings and Invesco Trust.

Diversification Opportunities for SWK Holdings and Invesco Trust

0.25

Correlation Coefficient

SWK Holdings  Invesco Trust

Modest diversification

The 3 months correlation between SWK and Invesco is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding SWK Holdings Corp and Invesco Trust For in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Trust For and SWK Holdings 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 SWK Holdings Corp are associated (or correlated) with Invesco Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Trust For has no effect on the direction of SWK Holdings i.e., SWK Holdings and Invesco Trust go up and down completely randomly.

Pair Corralation between SWK Holdings and Invesco Trust

Given the investment horizon of 90 days SWK Holdings Corp is expected to under-perform the Invesco Trust. In addition to that, SWK Holdings is 2.48 times more volatile than Invesco Trust For. It trades about -0.01 of its total potential returns per unit of risk. Invesco Trust For is currently generating about 0.07 per unit of volatility. If you would invest  915.00  in Invesco Trust For on October 9, 2024 and sell it today you would earn a total of  93.00  from holding Invesco Trust For or generate 10.16% return on investment over 90 days.

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

SWK Holdings Corp  vs.  Invesco Trust For

SWK Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SWK Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, SWK Holdings is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Invesco Trust For

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Trust For has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Invesco Trust is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SWK Holdings and Invesco Trust

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

The idea behind SWK Holdings Corp and Invesco Trust For 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.