Correlation Between FlexShares STOXX and Invesco Dynamic

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

By analyzing existing cross correlation between FlexShares STOXX Global and Invesco Dynamic Leisure, you can compare the effects of market volatilities on FlexShares STOXX and Invesco Dynamic 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 FlexShares STOXX with a short position of Invesco Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares STOXX and Invesco Dynamic.

Diversification Opportunities for FlexShares STOXX and Invesco Dynamic

-0.47

Correlation Coefficient

FlexShares STOXX  Invesco Dynamic

Very good diversification

The 3 months correlation between FlexShares and Invesco is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and Invesco Dynamic Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Leisure and FlexShares STOXX 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 FlexShares STOXX Global are associated (or correlated) with Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Leisure has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and Invesco Dynamic go up and down completely randomly.

Pair Corralation between FlexShares STOXX and Invesco Dynamic

Given the investment horizon of 90 days FlexShares STOXX Global is expected to under-perform the Invesco Dynamic. But the etf apears to be less risky and, when comparing its historical volatility, FlexShares STOXX Global is 1.88 times less risky than Invesco Dynamic. The etf trades about -0.08 of its potential returns per unit of risk. The Invesco Dynamic Leisure is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  4,541  in Invesco Dynamic Leisure on September 12, 2024 and sell it today you would earn a total of  846.00  from holding Invesco Dynamic Leisure or generate 18.63% return on investment over 90 days.

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

FlexShares STOXX Global  vs.  Invesco Dynamic Leisure

FlexShares STOXX Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares STOXX Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FlexShares STOXX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Dynamic Leisure

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Leisure are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Invesco Dynamic revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FlexShares STOXX and Invesco Dynamic

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

The idea behind FlexShares STOXX Global and Invesco Dynamic Leisure 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.