Correlation Between Sentinel Small and Invesco Government

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

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

Diversification Opportunities for Sentinel Small and Invesco Government

0.32

Correlation Coefficient

Sentinel Small  Invesco Government

Weak diversification

The 3 months correlation between Sentinel and Invesco is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Small Pany and Invesco Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Government and Sentinel Small 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 Sentinel Small Pany are associated (or correlated) with Invesco Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Government has no effect on the direction of Sentinel Small i.e., Sentinel Small and Invesco Government go up and down completely randomly.

Pair Corralation between Sentinel Small and Invesco Government

Assuming the 90 days horizon Sentinel Small Pany is expected to under-perform the Invesco Government. In addition to that, Sentinel Small is 9.23 times more volatile than Invesco Government. It trades about -0.03 of its total potential returns per unit of risk. Invesco Government is currently generating about -0.02 per unit of volatility. If you would invest  696.00  in Invesco Government on September 29, 2024 and sell it today you would lose (1.00) from holding Invesco Government or give up 0.14% of portfolio value over 90 days.

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

Sentinel Small Pany  vs.  Invesco Government

Sentinel Small Pany

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sentinel Small Pany has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sentinel Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Government has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Invesco Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sentinel Small and Invesco Government

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

The idea behind Sentinel Small Pany and Invesco Government 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.