Correlation Between Invesco California and SWK Holdings

Can any of the company-specific risk be diversified away by investing in both Invesco California and SWK Holdings 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 SWK Holdings 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 SWK Holdings Corp, you can compare the effects of market volatilities on Invesco California and SWK Holdings 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 SWK Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco California and SWK Holdings.

Diversification Opportunities for Invesco California and SWK Holdings

-0.17

Correlation Coefficient

Invesco California  SWK Holdings

Good diversification

The 3 months correlation between Invesco and SWK is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Invesco California Value and SWK Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWK Holdings 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 SWK Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWK Holdings Corp has no effect on the direction of Invesco California i.e., Invesco California and SWK Holdings go up and down completely randomly.

Pair Corralation between Invesco California and SWK Holdings

Considering the 90-day investment horizon Invesco California is expected to generate 1.24 times less return on investment than SWK Holdings. But when comparing it to its historical volatility, Invesco California Value is 1.58 times less risky than SWK Holdings. It trades about 0.11 of its potential returns per unit of risk. SWK Holdings Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,603  in SWK Holdings Corp on October 23, 2024 and sell it today you would earn a total of  36.00  from holding SWK Holdings Corp or generate 2.25% return on investment over 90 days.

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

Invesco California Value  vs.  SWK Holdings Corp

Invesco California Value

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco California Value are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Invesco California may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Invesco California and SWK Holdings

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

The idea behind Invesco California Value and SWK Holdings 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.