Correlation Between ETRACS 2xMonthly and Invesco Dynamic

Can any of the company-specific risk be diversified away by investing in both ETRACS 2xMonthly and Invesco Dynamic 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 ETRACS 2xMonthly and Invesco Dynamic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ETRACS 2xMonthly Pay and Invesco Dynamic Building, you can compare the effects of market volatilities on ETRACS 2xMonthly and Invesco Dynamic 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 ETRACS 2xMonthly with a short position of Invesco Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2xMonthly and Invesco Dynamic.

Diversification Opportunities for ETRACS 2xMonthly and Invesco Dynamic

0.83

Correlation Coefficient

ETRACS 2xMonthly  Invesco Dynamic

Very poor diversification

The 3 months correlation between ETRACS and Invesco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2xMonthly Pay and Invesco Dynamic Building in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Building and ETRACS 2xMonthly 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 ETRACS 2xMonthly Pay are associated (or correlated) with Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Building has no effect on the direction of ETRACS 2xMonthly i.e., ETRACS 2xMonthly and Invesco Dynamic go up and down completely randomly.

Pair Corralation between ETRACS 2xMonthly and Invesco Dynamic

Given the investment horizon of 90 days ETRACS 2xMonthly is expected to generate 1.91 times less return on investment than Invesco Dynamic. In addition to that, ETRACS 2xMonthly is 1.09 times more volatile than Invesco Dynamic Building. It trades about 0.1 of its total potential returns per unit of risk. Invesco Dynamic Building is currently generating about 0.21 per unit of volatility. If you would invest  7,365  in Invesco Dynamic Building on May 5, 2025 and sell it today you would earn a total of  1,117  from holding Invesco Dynamic Building or generate 15.17% return on investment over 90 days.

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

ETRACS 2xMonthly Pay  vs.  Invesco Dynamic Building

ETRACS 2xMonthly Pay

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS 2xMonthly Pay are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, ETRACS 2xMonthly may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Invesco Dynamic Building

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Building are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady forward-looking signals, Invesco Dynamic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ETRACS 2xMonthly and Invesco Dynamic

The main advantage of trading using opposite ETRACS 2xMonthly and Invesco Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2xMonthly position performs unexpectedly, Invesco Dynamic 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 Invesco Dynamic will offset losses from the drop in Invesco Dynamic's long position.

The idea behind ETRACS 2xMonthly Pay and Invesco Dynamic Building 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.