Correlation Between Invesco European and Six Circles

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

By analyzing existing cross correlation between Invesco European Growth and Six Circles Managed, you can compare the effects of market volatilities on Invesco European and Six Circles 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 European with a short position of Six Circles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco European and Six Circles.

Diversification Opportunities for Invesco European and Six Circles

0.98

Correlation Coefficient

Invesco European  Six Circles

Almost no diversification

The 3 months correlation between Invesco and Six is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Invesco European Growth and Six Circles Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Circles Managed and Invesco European 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 European Growth are associated (or correlated) with Six Circles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Circles Managed has no effect on the direction of Invesco European i.e., Invesco European and Six Circles go up and down completely randomly.

Pair Corralation between Invesco European and Six Circles

Assuming the 90 days horizon Invesco European Growth is expected to under-perform the Six Circles. But the mutual fund apears to be less risky and, when comparing its historical volatility, Invesco European Growth is 1.07 times less risky than Six Circles. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Six Circles Managed is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,382  in Six Circles Managed on September 5, 2024 and sell it today you would lose (14.00) from holding Six Circles Managed or give up 1.01% of portfolio value over 90 days.

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

Invesco European Growth  vs.  Six Circles Managed

Invesco European Growth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Six Circles Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Six Circles Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Six Circles is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco European and Six Circles

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

The idea behind Invesco European Growth and Six Circles Managed 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.