Correlation Between Formidable ETF and Invesco Global

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

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

Diversification Opportunities for Formidable ETF and Invesco Global

0.76

Correlation Coefficient

Formidable ETF  Invesco Global

Poor diversification

The 3 months correlation between Formidable and Invesco is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Formidable ETF and Invesco Global Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Global Clean and Formidable ETF 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 Formidable ETF are associated (or correlated) with Invesco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Global Clean has no effect on the direction of Formidable ETF i.e., Formidable ETF and Invesco Global go up and down completely randomly.

Pair Corralation between Formidable ETF and Invesco Global

Given the investment horizon of 90 days Formidable ETF is expected to generate 0.42 times more return on investment than Invesco Global. However, Formidable ETF is 2.4 times less risky than Invesco Global. It trades about -0.08 of its potential returns per unit of risk. Invesco Global Clean is currently generating about -0.1 per unit of risk. If you would invest  2,269  in Formidable ETF on September 17, 2024 and sell it today you would lose (87.00) from holding Formidable ETF or give up 3.83% of portfolio value over 90 days.

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

Formidable ETF  vs.  Invesco Global Clean

Formidable ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Formidable ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Formidable ETF is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Invesco Global Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Global Clean has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Formidable ETF and Invesco Global

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

The idea behind Formidable ETF and Invesco Global Clean 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.