Correlation Between Invesco Pennsylvania and Invesco Trust

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

By analyzing existing cross correlation between Invesco Pennsylvania Value and Invesco Trust For, you can compare the effects of market volatilities on Invesco Pennsylvania and Invesco Trust 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 Pennsylvania with a short position of Invesco Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Pennsylvania and Invesco Trust.

Diversification Opportunities for Invesco Pennsylvania and Invesco Trust

0.9

Correlation Coefficient

Invesco Pennsylvania  Invesco Trust

Almost no diversification

The 3 months correlation between Invesco and Invesco is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Pennsylvania Value and Invesco Trust For in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Trust For and Invesco Pennsylvania 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 Pennsylvania Value are associated (or correlated) with Invesco Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Trust For has no effect on the direction of Invesco Pennsylvania i.e., Invesco Pennsylvania and Invesco Trust go up and down completely randomly.

Pair Corralation between Invesco Pennsylvania and Invesco Trust

Considering the 90-day investment horizon Invesco Pennsylvania is expected to generate 1.35 times less return on investment than Invesco Trust. In addition to that, Invesco Pennsylvania is 1.08 times more volatile than Invesco Trust For. It trades about 0.29 of its total potential returns per unit of risk. Invesco Trust For is currently generating about 0.42 per unit of volatility. If you would invest  1,110  in Invesco Trust For on September 3, 2024 and sell it today you would earn a total of  44.00  from holding Invesco Trust For or generate 3.96% return on investment over 90 days.

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

Invesco Pennsylvania Value  vs.  Invesco Trust For

Invesco Pennsylvania

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Pennsylvania Value are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Invesco Pennsylvania is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Invesco Trust For

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Trust For are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Invesco Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco Pennsylvania and Invesco Trust

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

The idea behind Invesco Pennsylvania Value and Invesco Trust For 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.