Correlation Between Invesco Gold and Lazard Equity

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

By analyzing existing cross correlation between Invesco Gold Special and Lazard Equity Franchise, you can compare the effects of market volatilities on Invesco Gold and Lazard Equity 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 Gold with a short position of Lazard Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Gold and Lazard Equity.

Diversification Opportunities for Invesco Gold and Lazard Equity

0.48

Correlation Coefficient

Invesco Gold  Lazard Equity

Very weak diversification

The 3 months correlation between Invesco and Lazard is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Gold Special and Lazard Equity Franchise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lazard Equity Franchise and Invesco Gold 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 Gold Special are associated (or correlated) with Lazard Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lazard Equity Franchise has no effect on the direction of Invesco Gold i.e., Invesco Gold and Lazard Equity go up and down completely randomly.

Pair Corralation between Invesco Gold and Lazard Equity

Assuming the 90 days horizon Invesco Gold Special is expected to generate 2.5 times more return on investment than Lazard Equity. However, Invesco Gold is 2.5 times more volatile than Lazard Equity Franchise. It trades about -0.02 of its potential returns per unit of risk. Lazard Equity Franchise is currently generating about -0.13 per unit of risk. If you would invest  2,885  in Invesco Gold Special on September 15, 2024 and sell it today you would lose (94.00) from holding Invesco Gold Special or give up 3.26% of portfolio value over 90 days.

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

Invesco Gold Special  vs.  Lazard Equity Franchise

Invesco Gold Special

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Gold Special has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Invesco Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lazard Equity Franchise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lazard Equity Franchise has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Lazard Equity 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 Gold and Lazard Equity

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

The idea behind Invesco Gold Special and Lazard Equity Franchise 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.