Correlation Between Invesco Agriculture and Simplify Interest

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

By analyzing existing cross correlation between Invesco Agriculture Commodity and Simplify Interest Rate, you can compare the effects of market volatilities on Invesco Agriculture and Simplify Interest 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 Agriculture with a short position of Simplify Interest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Agriculture and Simplify Interest.

Diversification Opportunities for Invesco Agriculture and Simplify Interest

0.3

Correlation Coefficient

Invesco Agriculture  Simplify Interest

Weak diversification

The 3 months correlation between Invesco and Simplify is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Agriculture Commodity and Simplify Interest Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Interest Rate and Invesco Agriculture 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 Agriculture Commodity are associated (or correlated) with Simplify Interest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Interest Rate has no effect on the direction of Invesco Agriculture i.e., Invesco Agriculture and Simplify Interest go up and down completely randomly.

Pair Corralation between Invesco Agriculture and Simplify Interest

Given the investment horizon of 90 days Invesco Agriculture Commodity is expected to generate 0.26 times more return on investment than Simplify Interest. However, Invesco Agriculture Commodity is 3.84 times less risky than Simplify Interest. It trades about 0.27 of its potential returns per unit of risk. Simplify Interest Rate is currently generating about -0.07 per unit of risk. If you would invest  3,657  in Invesco Agriculture Commodity on September 5, 2024 and sell it today you would earn a total of  162.00  from holding Invesco Agriculture Commodity or generate 4.43% return on investment over 90 days.

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

Invesco Agriculture Commodity  vs.  Simplify Interest Rate

Invesco Agriculture

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Agriculture Commodity are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental drivers, Invesco Agriculture may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Simplify Interest Rate

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Interest Rate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting forward indicators, Simplify Interest showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Agriculture and Simplify Interest

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

The idea behind Invesco Agriculture Commodity and Simplify Interest Rate 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.