Correlation Between Steelpath Select and Invesco Quality

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

By analyzing existing cross correlation between Steelpath Select 40 and Invesco Quality Income, you can compare the effects of market volatilities on Steelpath Select and Invesco Quality 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 Steelpath Select with a short position of Invesco Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steelpath Select and Invesco Quality.

Diversification Opportunities for Steelpath Select and Invesco Quality

-0.45

Correlation Coefficient

Steelpath Select  Invesco Quality

Very good diversification

The 3 months correlation between Steelpath and Invesco is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Steelpath Select 40 and Invesco Quality Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Quality Income and Steelpath Select 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 Steelpath Select 40 are associated (or correlated) with Invesco Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Quality Income has no effect on the direction of Steelpath Select i.e., Steelpath Select and Invesco Quality go up and down completely randomly.

Pair Corralation between Steelpath Select and Invesco Quality

Assuming the 90 days horizon Steelpath Select 40 is expected to generate 2.8 times more return on investment than Invesco Quality. However, Steelpath Select is 2.8 times more volatile than Invesco Quality Income. It trades about 0.15 of its potential returns per unit of risk. Invesco Quality Income is currently generating about -0.07 per unit of risk. If you would invest  705.00  in Steelpath Select 40 on September 27, 2024 and sell it today you would earn a total of  46.00  from holding Steelpath Select 40 or generate 6.52% return on investment over 90 days.

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

Steelpath Select 40  vs.  Invesco Quality Income

Steelpath Select

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steelpath Select 40 are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Steelpath Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco Quality Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Steelpath Select and Invesco Quality

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

The idea behind Steelpath Select 40 and Invesco Quality Income 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.