Correlation Between Vela Large and Invesco High

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

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

Diversification Opportunities for Vela Large and Invesco High

0.81

Correlation Coefficient

Vela Large  Invesco High

Very poor diversification

The 3 months correlation between VELA and Invesco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Vela Large Cap and Invesco High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco High Yield and Vela Large 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 Vela Large Cap are associated (or correlated) with Invesco High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco High Yield has no effect on the direction of Vela Large i.e., Vela Large and Invesco High go up and down completely randomly.

Pair Corralation between Vela Large and Invesco High

Assuming the 90 days horizon Vela Large Cap is expected to generate 3.14 times more return on investment than Invesco High. However, Vela Large is 3.14 times more volatile than Invesco High Yield. It trades about 0.32 of its potential returns per unit of risk. Invesco High Yield is currently generating about 0.15 per unit of risk. If you would invest  1,756  in Vela Large Cap on September 5, 2024 and sell it today you would earn a total of  65.00  from holding Vela Large Cap or generate 3.7% return on investment over 90 days.

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

Vela Large Cap  vs.  Invesco High Yield

Vela Large Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vela Large Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vela Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco High Yield

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco High Yield are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Invesco High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vela Large and Invesco High

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

The idea behind Vela Large Cap and Invesco High Yield 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.