Correlation Between Invesco Advantage and Western Asset

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

Diversification Opportunities for Invesco Advantage and Western Asset

0.54

Correlation Coefficient

Invesco Advantage  Western Asset

Very weak diversification

The 3 months correlation between Invesco and Western is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Advantage MIT and Western Asset Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Managed 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Managed has no effect on the direction of Invesco Advantage i.e., Invesco Advantage and Western Asset go up and down completely randomly.

Pair Corralation between Invesco Advantage and Western Asset

Considering the 90-day investment horizon Invesco Advantage MIT is expected to generate 1.03 times more return on investment than Western Asset. However, Invesco Advantage is 1.03 times more volatile than Western Asset Managed. It trades about 0.09 of its potential returns per unit of risk. Western Asset Managed is currently generating about 0.03 per unit of risk. If you would invest  889.00  in Invesco Advantage MIT on August 31, 2024 and sell it today you would earn a total of  27.00  from holding Invesco Advantage MIT or generate 3.04% return on investment over 90 days.

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

Invesco Advantage MIT  vs.  Western Asset Managed

Invesco Advantage MIT

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Advantage MIT are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. 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.

Western Asset Managed

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Managed are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of comparatively stable primary indicators, Western Asset is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Invesco Advantage and Western Asset

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

The idea behind Invesco Advantage MIT and Western Asset Managed 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.