Correlation Between Invesco Financial and VanEck Preferred

Can any of the company-specific risk be diversified away by investing in both Invesco Financial and VanEck Preferred 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 VanEck Preferred 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 VanEck Preferred Securities, you can compare the effects of market volatilities on Invesco Financial and VanEck Preferred 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 VanEck Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Financial and VanEck Preferred.

Diversification Opportunities for Invesco Financial and VanEck Preferred

0.73

Correlation Coefficient

Invesco Financial  VanEck Preferred

Poor diversification

The 3 months correlation between Invesco and VanEck is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Financial Preferred and VanEck Preferred Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Preferred Sec 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 VanEck Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Preferred Sec has no effect on the direction of Invesco Financial i.e., Invesco Financial and VanEck Preferred go up and down completely randomly.

Pair Corralation between Invesco Financial and VanEck Preferred

Considering the 90-day investment horizon Invesco Financial is expected to generate 4.14 times less return on investment than VanEck Preferred. In addition to that, Invesco Financial is 1.22 times more volatile than VanEck Preferred Securities. It trades about 0.02 of its total potential returns per unit of risk. VanEck Preferred Securities is currently generating about 0.09 per unit of volatility. If you would invest  1,750  in VanEck Preferred Securities on August 30, 2024 and sell it today you would earn a total of  51.00  from holding VanEck Preferred Securities or generate 2.91% return on investment over 90 days.

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

Invesco Financial Preferred  vs.  VanEck Preferred Securities

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.

VanEck Preferred Sec

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Preferred Securities are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, VanEck Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco Financial and VanEck Preferred

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

The idea behind Invesco Financial Preferred and VanEck Preferred Securities 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.