Correlation Between Invesco Global and Mid Cap

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

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

Diversification Opportunities for Invesco Global and Mid Cap

-0.53

Correlation Coefficient

Invesco Global  Mid Cap

Excellent diversification

The 3 months correlation between Invesco and Mid is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Global Health and Mid Cap Value Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value and Invesco Global 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 Global Health are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Value has no effect on the direction of Invesco Global i.e., Invesco Global and Mid Cap go up and down completely randomly.

Pair Corralation between Invesco Global and Mid Cap

Assuming the 90 days horizon Invesco Global is expected to generate 2.06 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Invesco Global Health is 1.29 times less risky than Mid Cap. It trades about 0.02 of its potential returns per unit of risk. Mid Cap Value Profund is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8,245  in Mid Cap Value Profund on September 20, 2024 and sell it today you would earn a total of  540.00  from holding Mid Cap Value Profund or generate 6.55% return on investment over 90 days.

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

Invesco Global Health  vs.  Mid Cap Value Profund

Invesco Global Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Global Health has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Mid Cap Value

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Mid Cap Value Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Mid Cap 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 Global and Mid Cap

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

The idea behind Invesco Global Health and Mid Cap Value Profund 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.