Correlation Between Ariel Appreciation and Invesco Small

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

By analyzing existing cross correlation between Ariel Appreciation Fund and Invesco Small Cap, you can compare the effects of market volatilities on Ariel Appreciation and Invesco Small 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 Ariel Appreciation with a short position of Invesco Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ariel Appreciation and Invesco Small.

Diversification Opportunities for Ariel Appreciation and Invesco Small

0.94

Correlation Coefficient

Ariel Appreciation  Invesco Small

Almost no diversification

The 3 months correlation between Ariel and Invesco is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Ariel Appreciation Fund and Invesco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Small Cap and Ariel Appreciation 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 Ariel Appreciation Fund are associated (or correlated) with Invesco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Small Cap has no effect on the direction of Ariel Appreciation i.e., Ariel Appreciation and Invesco Small go up and down completely randomly.

Pair Corralation between Ariel Appreciation and Invesco Small

Assuming the 90 days horizon Ariel Appreciation Fund is expected to under-perform the Invesco Small. In addition to that, Ariel Appreciation is 1.02 times more volatile than Invesco Small Cap. It trades about -0.04 of its total potential returns per unit of risk. Invesco Small Cap is currently generating about 0.0 per unit of volatility. If you would invest  2,622  in Invesco Small Cap on September 25, 2024 and sell it today you would lose (29.00) from holding Invesco Small Cap or give up 1.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Ariel Appreciation Fund  vs.  Invesco Small Cap

Ariel Appreciation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Invesco Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ariel Appreciation and Invesco Small

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

The idea behind Ariel Appreciation Fund and Invesco Small Cap 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.