Correlation Between Invesco Advantage and General American

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

Diversification Opportunities for Invesco Advantage and General American

0.02

Correlation Coefficient

Invesco Advantage  General American

Significant diversification

The 3 months correlation between Invesco and General is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Advantage MIT and General American Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General American Inv 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 General American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General American Inv has no effect on the direction of Invesco Advantage i.e., Invesco Advantage and General American go up and down completely randomly.

Pair Corralation between Invesco Advantage and General American

Considering the 90-day investment horizon Invesco Advantage MIT is expected to under-perform the General American. But the stock apears to be less risky and, when comparing its historical volatility, Invesco Advantage MIT is 1.12 times less risky than General American. The stock trades about -0.19 of its potential returns per unit of risk. The General American Investors is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  5,180  in General American Investors on October 9, 2024 and sell it today you would lose (66.00) from holding General American Investors or give up 1.27% of portfolio value over 90 days.

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

Invesco Advantage MIT  vs.  General American Investors

Invesco Advantage MIT

Risk-Adjusted Performance

0 of 100

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.

General American Inv

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General American Investors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, General American is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco Advantage and General American

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

The idea behind Invesco Advantage MIT and General American Investors 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.