Correlation Between Invesco Health and Ecofin Global

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

Diversification Opportunities for Invesco Health and Ecofin Global

0.75

Correlation Coefficient

Invesco Health  Ecofin Global

Poor diversification

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

Pair Corralation between Invesco Health and Ecofin Global

Assuming the 90 days trading horizon Invesco Health is expected to generate 1.62 times less return on investment than Ecofin Global. But when comparing it to its historical volatility, Invesco Health Care is 1.71 times less risky than Ecofin Global. It trades about 0.03 of its potential returns per unit of risk. Ecofin Global Utilities is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  16,940  in Ecofin Global Utilities on October 4, 2024 and sell it today you would earn a total of  1,460  from holding Ecofin Global Utilities or generate 8.62% return on investment over 90 days.

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

Invesco Health Care  vs.  Ecofin Global Utilities

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 weak 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.

Ecofin Global Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecofin Global Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Invesco Health and Ecofin Global

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

The idea behind Invesco Health Care and Ecofin Global Utilities 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.