Correlation Between Invesco Trust and Western Asset

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

Diversification Opportunities for Invesco Trust and Western Asset

0.32

Correlation Coefficient

Invesco Trust  Western Asset

Weak diversification

The 3 months correlation between Invesco and Western is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Trust For and Western Asset Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Diversified and Invesco Trust 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 Trust For 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 Diversified has no effect on the direction of Invesco Trust i.e., Invesco Trust and Western Asset go up and down completely randomly.

Pair Corralation between Invesco Trust and Western Asset

Considering the 90-day investment horizon Invesco Trust For is expected to generate 0.77 times more return on investment than Western Asset. However, Invesco Trust For is 1.3 times less risky than Western Asset. It trades about 0.09 of its potential returns per unit of risk. Western Asset Diversified is currently generating about 0.02 per unit of risk. If you would invest  1,122  in Invesco Trust For on September 4, 2024 and sell it today you would earn a total of  31.00  from holding Invesco Trust For or generate 2.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Invesco Trust For  vs.  Western Asset Diversified

Invesco Trust For

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Trust For are ranked lower than 7 (%) 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.

Western Asset Diversified

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Diversified are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Western Asset is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Invesco Trust and Western Asset

The main advantage of trading using opposite Invesco Trust and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Trust 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 Trust For and Western Asset Diversified 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.