Correlation Between Invesco California and Invesco Advantage

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

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

Diversification Opportunities for Invesco California and Invesco Advantage

0.86

Correlation Coefficient

Invesco California  Invesco Advantage

Very poor diversification

The 3 months correlation between Invesco and Invesco is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Invesco California Value and Invesco Advantage MIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Advantage MIT and Invesco California 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 California Value are associated (or correlated) with Invesco Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Advantage MIT has no effect on the direction of Invesco California i.e., Invesco California and Invesco Advantage go up and down completely randomly.

Pair Corralation between Invesco California and Invesco Advantage

Considering the 90-day investment horizon Invesco California Value is expected to under-perform the Invesco Advantage. In addition to that, Invesco California is 1.47 times more volatile than Invesco Advantage MIT. It trades about -0.32 of its total potential returns per unit of risk. Invesco Advantage MIT is currently generating about -0.17 per unit of volatility. If you would invest  923.00  in Invesco Advantage MIT on July 18, 2024 and sell it today you would lose (12.00) from holding Invesco Advantage MIT or give up 1.3% of portfolio value over 90 days.

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

Invesco California Value  vs.  Invesco Advantage MIT

Invesco California Value

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco California Value are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Invesco California is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Invesco Advantage MIT

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Advantage MIT are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, Invesco Advantage is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Invesco California and Invesco Advantage

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

The idea behind Invesco California Value and Invesco Advantage MIT 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.