Correlation Between Invesco Dynamic and Smith Nephew

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

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

Diversification Opportunities for Invesco Dynamic and Smith Nephew

-0.89

Correlation Coefficient

Invesco Dynamic  Smith Nephew

Pay attention - limited upside

The 3 months correlation between Invesco and Smith is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Leisure and Smith Nephew SNATS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew SNATS and Invesco Dynamic 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 Dynamic Leisure are associated (or correlated) with Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew SNATS has no effect on the direction of Invesco Dynamic i.e., Invesco Dynamic and Smith Nephew go up and down completely randomly.

Pair Corralation between Invesco Dynamic and Smith Nephew

Considering the 90-day investment horizon Invesco Dynamic Leisure is expected to generate 0.48 times more return on investment than Smith Nephew. However, Invesco Dynamic Leisure is 2.1 times less risky than Smith Nephew. It trades about 0.29 of its potential returns per unit of risk. Smith Nephew SNATS is currently generating about -0.13 per unit of risk. If you would invest  4,541  in Invesco Dynamic Leisure on September 12, 2024 and sell it today you would earn a total of  889.00  from holding Invesco Dynamic Leisure or generate 19.58% return on investment over 90 days.

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

Invesco Dynamic Leisure  vs.  Smith Nephew SNATS

Invesco Dynamic Leisure

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Leisure are ranked lower than 22 (%) 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.

Smith Nephew SNATS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smith Nephew SNATS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Invesco Dynamic and Smith Nephew

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

The idea behind Invesco Dynamic Leisure and Smith Nephew SNATS 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.