Correlation Between Invesco International and Invesco RAFI

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

By analyzing existing cross correlation between Invesco International BuyBack and Invesco RAFI Strategic, you can compare the effects of market volatilities on Invesco International and Invesco RAFI 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 International with a short position of Invesco RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco International and Invesco RAFI.

Diversification Opportunities for Invesco International and Invesco RAFI

-0.36

Correlation Coefficient

Invesco International  Invesco RAFI

Very good diversification

The 3 months correlation between Invesco and Invesco is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Invesco International BuyBack and Invesco RAFI Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco RAFI Strategic and Invesco International 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 International BuyBack are associated (or correlated) with Invesco RAFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco RAFI Strategic has no effect on the direction of Invesco International i.e., Invesco International and Invesco RAFI go up and down completely randomly.

Pair Corralation between Invesco International and Invesco RAFI

Given the investment horizon of 90 days Invesco International is expected to generate 4.7 times less return on investment than Invesco RAFI. In addition to that, Invesco International is 1.55 times more volatile than Invesco RAFI Strategic. It trades about 0.02 of its total potential returns per unit of risk. Invesco RAFI Strategic is currently generating about 0.14 per unit of volatility. If you would invest  4,898  in Invesco RAFI Strategic on September 13, 2024 and sell it today you would earn a total of  250.00  from holding Invesco RAFI Strategic or generate 5.1% return on investment over 90 days.

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

Invesco International BuyBack  vs.  Invesco RAFI Strategic

Invesco International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco International BuyBack are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward-looking signals, Invesco International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Invesco RAFI Strategic

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco RAFI Strategic are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Invesco RAFI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Invesco International and Invesco RAFI

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

The idea behind Invesco International BuyBack and Invesco RAFI Strategic 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.