Correlation Between International Equity and Invesco Stock

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

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

Diversification Opportunities for International Equity and Invesco Stock

0.52

Correlation Coefficient

International Equity  Invesco Stock

Very weak diversification

The 3 months correlation between International and Invesco is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Fund and Invesco Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Stock and International Equity 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 International Equity Fund are associated (or correlated) with Invesco Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Stock has no effect on the direction of International Equity i.e., International Equity and Invesco Stock go up and down completely randomly.

Pair Corralation between International Equity and Invesco Stock

Assuming the 90 days horizon International Equity Fund is expected to under-perform the Invesco Stock. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Equity Fund is 1.63 times less risky than Invesco Stock. The mutual fund trades about -0.21 of its potential returns per unit of risk. The Invesco Stock Fund is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  3,123  in Invesco Stock Fund on October 11, 2024 and sell it today you would lose (226.00) from holding Invesco Stock Fund or give up 7.24% of portfolio value over 90 days.

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

International Equity Fund  vs.  Invesco Stock Fund

International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Equity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Invesco Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Stock Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with International Equity and Invesco Stock

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

The idea behind International Equity Fund and Invesco Stock 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.