Correlation Between Invesco Financial and Innovator

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

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

Diversification Opportunities for Invesco Financial and Innovator

0.92

Correlation Coefficient

Invesco Financial  Innovator

Almost no diversification

The 3 months correlation between Invesco and Innovator is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Financial Preferred and Innovator SP Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP Investment and Invesco Financial 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 Financial Preferred are associated (or correlated) with Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP Investment has no effect on the direction of Invesco Financial i.e., Invesco Financial and Innovator go up and down completely randomly.

Pair Corralation between Invesco Financial and Innovator

Considering the 90-day investment horizon Invesco Financial is expected to generate 2.12 times less return on investment than Innovator. In addition to that, Invesco Financial is 1.1 times more volatile than Innovator SP Investment. It trades about 0.02 of its total potential returns per unit of risk. Innovator SP Investment is currently generating about 0.04 per unit of volatility. If you would invest  1,892  in Innovator SP Investment on August 30, 2024 and sell it today you would earn a total of  27.00  from holding Innovator SP Investment or generate 1.43% return on investment over 90 days.

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

Invesco Financial Preferred  vs.  Innovator SP Investment

Invesco Financial

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Financial Preferred are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Invesco Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Innovator SP Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator SP Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Innovator is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco Financial and Innovator

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

The idea behind Invesco Financial Preferred and Innovator SP Investment 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.