Correlation Between Invesco Global and Health Biotchnology

Can any of the company-specific risk be diversified away by investing in both Invesco Global and Health Biotchnology 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 Health Biotchnology 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 Health Biotchnology Portfolio, you can compare the effects of market volatilities on Invesco Global and Health Biotchnology 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 Health Biotchnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Global and Health Biotchnology.

Diversification Opportunities for Invesco Global and Health Biotchnology

0.85

Correlation Coefficient

Invesco Global  Health Biotchnology

Very poor diversification

The 3 months correlation between Invesco and HEALTH is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Global Health and Health Biotchnology Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Biotchnology 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 Health Biotchnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Biotchnology has no effect on the direction of Invesco Global i.e., Invesco Global and Health Biotchnology go up and down completely randomly.

Pair Corralation between Invesco Global and Health Biotchnology

Assuming the 90 days horizon Invesco Global Health is expected to under-perform the Health Biotchnology. But the mutual fund apears to be less risky and, when comparing its historical volatility, Invesco Global Health is 1.02 times less risky than Health Biotchnology. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Health Biotchnology Portfolio is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  1,466  in Health Biotchnology Portfolio on September 3, 2024 and sell it today you would lose (76.00) from holding Health Biotchnology Portfolio or give up 5.18% of portfolio value over 90 days.

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

Invesco Global Health  vs.  Health Biotchnology Portfolio

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 fairly strong basic indicators, Invesco Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Health Biotchnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Biotchnology Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Health Biotchnology 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 Health Biotchnology

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

The idea behind Invesco Global Health and Health Biotchnology Portfolio 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.