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 Index, 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

-0.68

Correlation Coefficient

Invesco Global  Mid Cap

Excellent diversification

The 3 months correlation between Invesco and Mid is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Global Health and Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Index 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 Index 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 Health is expected to under-perform the Mid Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Invesco Global Health is 1.21 times less risky than Mid Cap. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Mid Cap Index is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,719  in Mid Cap Index on September 14, 2024 and sell it today you would earn a total of  221.00  from holding Mid Cap Index or generate 8.13% return on investment over 90 days.

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

Invesco Global Health  vs.  Mid Cap Index

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Mid Cap Index

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Index are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Mid Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Index 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.