Correlation Between Invesco CurrencyShares and FT Cboe

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

By analyzing existing cross correlation between Invesco CurrencyShares Japanese and FT Cboe Vest, you can compare the effects of market volatilities on Invesco CurrencyShares and FT Cboe 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 CurrencyShares with a short position of FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco CurrencyShares and FT Cboe.

Diversification Opportunities for Invesco CurrencyShares and FT Cboe

-0.33

Correlation Coefficient

Invesco CurrencyShares  FT Cboe

Very good diversification

The 3 months correlation between Invesco and FNOV is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest and Invesco CurrencyShares 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 CurrencyShares Japanese are associated (or correlated) with FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Invesco CurrencyShares i.e., Invesco CurrencyShares and FT Cboe go up and down completely randomly.

Pair Corralation between Invesco CurrencyShares and FT Cboe

Considering the 90-day investment horizon Invesco CurrencyShares Japanese is expected to under-perform the FT Cboe. But the etf apears to be less risky and, when comparing its historical volatility, Invesco CurrencyShares Japanese is 1.12 times less risky than FT Cboe. The etf trades about -0.05 of its potential returns per unit of risk. The FT Cboe Vest is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,472  in FT Cboe Vest on February 7, 2024 and sell it today you would earn a total of  984.00  from holding FT Cboe Vest or generate 28.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Invesco CurrencyShares Japanes  vs.  FT Cboe Vest

Invesco CurrencyShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco CurrencyShares Japanese has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Invesco CurrencyShares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

FT Cboe Vest

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FT Cboe Vest are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, FT Cboe is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Invesco CurrencyShares and FT Cboe

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

The idea behind Invesco CurrencyShares Japanese and FT Cboe Vest 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.