Correlation Between IQ Healthy and Invesco DWA

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

By analyzing existing cross correlation between IQ Healthy Hearts and Invesco DWA Consumer, you can compare the effects of market volatilities on IQ Healthy and Invesco DWA 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 IQ Healthy with a short position of Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQ Healthy and Invesco DWA.

Diversification Opportunities for IQ Healthy and Invesco DWA

-0.67

Correlation Coefficient

IQ Healthy  Invesco DWA

Excellent diversification

The 3 months correlation between HART and Invesco is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding IQ Healthy Hearts and Invesco DWA Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Consumer and IQ Healthy 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 IQ Healthy Hearts are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Consumer has no effect on the direction of IQ Healthy i.e., IQ Healthy and Invesco DWA go up and down completely randomly.

Pair Corralation between IQ Healthy and Invesco DWA

Given the investment horizon of 90 days IQ Healthy Hearts is expected to under-perform the Invesco DWA. But the etf apears to be less risky and, when comparing its historical volatility, IQ Healthy Hearts is 1.21 times less risky than Invesco DWA. The etf trades about -0.09 of its potential returns per unit of risk. The Invesco DWA Consumer is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  9,957  in Invesco DWA Consumer on September 2, 2024 and sell it today you would earn a total of  1,086  from holding Invesco DWA Consumer or generate 10.91% return on investment over 90 days.

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

IQ Healthy Hearts  vs.  Invesco DWA Consumer

IQ Healthy Hearts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IQ Healthy Hearts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IQ Healthy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco DWA Consumer

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Consumer are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Invesco DWA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IQ Healthy and Invesco DWA

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

The idea behind IQ Healthy Hearts and Invesco DWA Consumer 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.