Correlation Between Invesco Low and Brompton Enhanced

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

By analyzing existing cross correlation between Invesco Low Volatility and Brompton Enhanced Multi Asset, you can compare the effects of market volatilities on Invesco Low and Brompton Enhanced 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 Low with a short position of Brompton Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Low and Brompton Enhanced.

Diversification Opportunities for Invesco Low and Brompton Enhanced

0.89

Correlation Coefficient

Invesco Low  Brompton Enhanced

Very poor diversification

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

Pair Corralation between Invesco Low and Brompton Enhanced

Assuming the 90 days trading horizon Invesco Low is expected to generate 1.57 times less return on investment than Brompton Enhanced. But when comparing it to its historical volatility, Invesco Low Volatility is 2.09 times less risky than Brompton Enhanced. It trades about 0.23 of its potential returns per unit of risk. Brompton Enhanced Multi Asset is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,337  in Brompton Enhanced Multi Asset on September 4, 2024 and sell it today you would earn a total of  98.00  from holding Brompton Enhanced Multi Asset or generate 7.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Invesco Low Volatility  vs.  Brompton Enhanced Multi Asset

Invesco Low Volatility

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Low Volatility are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Invesco Low is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Brompton Enhanced Multi

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Enhanced Multi Asset are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brompton Enhanced may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco Low and Brompton Enhanced

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

The idea behind Invesco Low Volatility and Brompton Enhanced Multi Asset 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.