Correlation Between Virtus Reaves and Invesco DWA

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

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

Diversification Opportunities for Virtus Reaves and Invesco DWA

0.74

Correlation Coefficient

Virtus Reaves  Invesco DWA

Poor diversification

The 3 months correlation between Virtus and Invesco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Reaves Utilities and Invesco DWA Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Consumer and Virtus Reaves 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 Virtus Reaves Utilities are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Consumer has no effect on the direction of Virtus Reaves i.e., Virtus Reaves and Invesco DWA go up and down completely randomly.

Pair Corralation between Virtus Reaves and Invesco DWA

Given the investment horizon of 90 days Virtus Reaves Utilities is expected to generate 2.36 times more return on investment than Invesco DWA. However, Virtus Reaves is 2.36 times more volatile than Invesco DWA Consumer. It trades about 0.11 of its potential returns per unit of risk. Invesco DWA Consumer is currently generating about 0.21 per unit of risk. If you would invest  5,969  in Virtus Reaves Utilities on September 14, 2024 and sell it today you would earn a total of  618.00  from holding Virtus Reaves Utilities or generate 10.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Virtus Reaves Utilities  vs.  Invesco DWA Consumer

Virtus Reaves Utilities

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Reaves Utilities are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, Virtus Reaves may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco DWA Consumer

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Consumer are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Invesco DWA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Virtus Reaves and Invesco DWA

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

The idea behind Virtus Reaves Utilities and Invesco DWA Consumer 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.