Correlation Between Invesco Health and Africa Opportunity

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

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

Diversification Opportunities for Invesco Health and Africa Opportunity

-0.75

Correlation Coefficient

Invesco Health  Africa Opportunity

Pay attention - limited upside

The 3 months correlation between Invesco and Africa is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Health Care and Africa Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Opportunity and Invesco Health 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 Health Care are associated (or correlated) with Africa Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Opportunity has no effect on the direction of Invesco Health i.e., Invesco Health and Africa Opportunity go up and down completely randomly.

Pair Corralation between Invesco Health and Africa Opportunity

Assuming the 90 days trading horizon Invesco Health is expected to generate 1.76 times less return on investment than Africa Opportunity. But when comparing it to its historical volatility, Invesco Health Care is 1.54 times less risky than Africa Opportunity. It trades about 0.03 of its potential returns per unit of risk. Africa Opportunity is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  57.00  in Africa Opportunity on October 11, 2024 and sell it today you would earn a total of  8.00  from holding Africa Opportunity or generate 14.04% return on investment over 90 days.

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

Invesco Health Care  vs.  Africa Opportunity

Invesco Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Africa Opportunity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Opportunity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Africa Opportunity may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Invesco Health and Africa Opportunity

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

The idea behind Invesco Health Care and Africa Opportunity 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.