Correlation Between Invesco Advantage and First Ottawa

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

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

Diversification Opportunities for Invesco Advantage and First Ottawa

0.32

Correlation Coefficient

Invesco Advantage  First Ottawa

Weak diversification

The 3 months correlation between Invesco and First is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Advantage MIT and First Ottawa Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Ottawa Bancshares and Invesco Advantage 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 Advantage MIT are associated (or correlated) with First Ottawa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Ottawa Bancshares has no effect on the direction of Invesco Advantage i.e., Invesco Advantage and First Ottawa go up and down completely randomly.

Pair Corralation between Invesco Advantage and First Ottawa

Considering the 90-day investment horizon Invesco Advantage is expected to generate 3.55 times less return on investment than First Ottawa. But when comparing it to its historical volatility, Invesco Advantage MIT is 7.35 times less risky than First Ottawa. It trades about 0.3 of its potential returns per unit of risk. First Ottawa Bancshares is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  14,500  in First Ottawa Bancshares on December 2, 2024 and sell it today you would earn a total of  1,100  from holding First Ottawa Bancshares or generate 7.59% return on investment over 90 days.

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

Invesco Advantage MIT  vs.  First Ottawa Bancshares

Invesco Advantage MIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Advantage MIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Invesco Advantage is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

First Ottawa Bancshares

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Ottawa Bancshares are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, First Ottawa sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Advantage and First Ottawa

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

The idea behind Invesco Advantage MIT and First Ottawa Bancshares 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.