Correlation Between Invesco Variable and Global X

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

By analyzing existing cross correlation between Invesco Variable Rate and Global X SuperIncome, you can compare the effects of market volatilities on Invesco Variable and Global X 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 Variable with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Variable and Global X.

Diversification Opportunities for Invesco Variable and Global X

-0.08

Correlation Coefficient

Invesco Variable  Global X

Good diversification

The 3 months correlation between Invesco and Global is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Variable Rate and Global X SuperIncome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X SuperIncome and Invesco Variable 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 Variable Rate are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X SuperIncome has no effect on the direction of Invesco Variable i.e., Invesco Variable and Global X go up and down completely randomly.

Pair Corralation between Invesco Variable and Global X

Considering the 90-day investment horizon Invesco Variable Rate is expected to generate 0.39 times more return on investment than Global X. However, Invesco Variable Rate is 2.57 times less risky than Global X. It trades about 0.08 of its potential returns per unit of risk. Global X SuperIncome is currently generating about -0.05 per unit of risk. If you would invest  2,396  in Invesco Variable Rate on December 28, 2024 and sell it today you would earn a total of  30.00  from holding Invesco Variable Rate or generate 1.25% return on investment over 90 days.

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

Invesco Variable Rate  vs.  Global X SuperIncome

Invesco Variable Rate

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Variable Rate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Invesco Variable is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Global X SuperIncome

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X SuperIncome has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Global X is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco Variable and Global X

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

The idea behind Invesco Variable Rate and Global X SuperIncome 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.