Correlation Between Invesco California and Arrowmark Financial

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

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

Diversification Opportunities for Invesco California and Arrowmark Financial

0.68

Correlation Coefficient

Invesco California  Arrowmark Financial

Poor diversification

The 3 months correlation between Invesco and Arrowmark is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Invesco California Value and Arrowmark Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrowmark Financial Corp and Invesco California 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 California Value are associated (or correlated) with Arrowmark Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrowmark Financial Corp has no effect on the direction of Invesco California i.e., Invesco California and Arrowmark Financial go up and down completely randomly.

Pair Corralation between Invesco California and Arrowmark Financial

Considering the 90-day investment horizon Invesco California is expected to generate 1.62 times less return on investment than Arrowmark Financial. But when comparing it to its historical volatility, Invesco California Value is 1.18 times less risky than Arrowmark Financial. It trades about 0.08 of its potential returns per unit of risk. Arrowmark Financial Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,987  in Arrowmark Financial Corp on October 22, 2024 and sell it today you would earn a total of  131.00  from holding Arrowmark Financial Corp or generate 6.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Invesco California Value  vs.  Arrowmark Financial Corp

Invesco California Value

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco California Value are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Invesco California is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Arrowmark Financial Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arrowmark Financial Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Arrowmark Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Invesco California and Arrowmark Financial

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

The idea behind Invesco California Value and Arrowmark Financial Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.