Correlation Between Science Technology and Invesco Technology

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

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

Diversification Opportunities for Science Technology and Invesco Technology

0.99

Correlation Coefficient

Science Technology  Invesco Technology

No risk reduction

The 3 months correlation between Science and Invesco is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Science Technology Fund and Invesco Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Technology and Science Technology 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 Science Technology Fund are associated (or correlated) with Invesco Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Technology has no effect on the direction of Science Technology i.e., Science Technology and Invesco Technology go up and down completely randomly.

Pair Corralation between Science Technology and Invesco Technology

Assuming the 90 days horizon Science Technology is expected to generate 1.33 times less return on investment than Invesco Technology. But when comparing it to its historical volatility, Science Technology Fund is 1.07 times less risky than Invesco Technology. It trades about 0.13 of its potential returns per unit of risk. Invesco Technology Fund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  6,350  in Invesco Technology Fund on August 30, 2024 and sell it today you would earn a total of  939.00  from holding Invesco Technology Fund or generate 14.79% return on investment over 90 days.

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

Science Technology Fund  vs.  Invesco Technology Fund

Science Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Science Technology Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Science Technology may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Invesco Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Technology 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, Invesco Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Science Technology and Invesco Technology

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

The idea behind Science Technology Fund and Invesco Technology 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.