Correlation Between Invesco Us and Xtrackers

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

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

Diversification Opportunities for Invesco Us and Xtrackers

0.88

Correlation Coefficient

Invesco Us  Xtrackers

Very poor diversification

The 3 months correlation between Invesco and Xtrackers is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Us Treasury and Xtrackers SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP and Invesco Us 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 Us Treasury are associated (or correlated) with Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP has no effect on the direction of Invesco Us i.e., Invesco Us and Xtrackers go up and down completely randomly.

Pair Corralation between Invesco Us and Xtrackers

Assuming the 90 days trading horizon Invesco Us is expected to generate 5.32 times less return on investment than Xtrackers. But when comparing it to its historical volatility, Invesco Us Treasury is 3.61 times less risky than Xtrackers. It trades about 0.1 of its potential returns per unit of risk. Xtrackers SP is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  20,020  in Xtrackers SP on September 25, 2024 and sell it today you would earn a total of  2,945  from holding Xtrackers SP or generate 14.71% return on investment over 90 days.

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

Invesco Us Treasury  vs.  Xtrackers SP

Invesco Us Treasury

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Us Treasury are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Invesco Us is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Xtrackers SP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers SP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xtrackers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Us and Xtrackers

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

The idea behind Invesco Us Treasury and Xtrackers SP 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .