Correlation Between Invesco Optimum and Invesco Agriculture

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

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

Diversification Opportunities for Invesco Optimum and Invesco Agriculture

0.28

Correlation Coefficient

Invesco Optimum  Invesco Agriculture

Modest diversification

The 3 months correlation between Invesco and Invesco is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Optimum Yield and Invesco Agriculture Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Agriculture and Invesco Optimum 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 Optimum Yield are associated (or correlated) with Invesco Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Agriculture has no effect on the direction of Invesco Optimum i.e., Invesco Optimum and Invesco Agriculture go up and down completely randomly.

Pair Corralation between Invesco Optimum and Invesco Agriculture

Given the investment horizon of 90 days Invesco Optimum is expected to generate 2.15 times less return on investment than Invesco Agriculture. In addition to that, Invesco Optimum is 1.21 times more volatile than Invesco Agriculture Commodity. It trades about 0.05 of its total potential returns per unit of risk. Invesco Agriculture Commodity is currently generating about 0.14 per unit of volatility. If you would invest  3,536  in Invesco Agriculture Commodity on September 5, 2024 and sell it today you would earn a total of  283.00  from holding Invesco Agriculture Commodity or generate 8.0% return on investment over 90 days.

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

Invesco Optimum Yield  vs.  Invesco Agriculture Commodity

Invesco Optimum Yield

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Optimum Yield are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Invesco Optimum is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Invesco Optimum and Invesco Agriculture

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

The idea behind Invesco Optimum Yield and Invesco Agriculture Commodity 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.