Correlation Between Invesco DWA and Direxion

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

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

Diversification Opportunities for Invesco DWA and Direxion

-0.31

Correlation Coefficient

Invesco DWA  Direxion

Very good diversification

The 3 months correlation between Invesco and Direxion is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Consumer and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion and Invesco DWA 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 DWA Consumer are associated (or correlated) with Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of Invesco DWA i.e., Invesco DWA and Direxion go up and down completely randomly.

Pair Corralation between Invesco DWA and Direxion

If you would invest  539,692  in Direxion on September 21, 2024 and sell it today you would earn a total of  0.00  from holding Direxion or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	9.09%
Values	Daily Returns

Invesco DWA Consumer  vs.  Direxion

Invesco DWA Consumer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco DWA Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Invesco DWA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Direxion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Direxion is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Invesco DWA and Direxion

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

The idea behind Invesco DWA Consumer and Direxion 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.