Correlation Between Invesco Advantage and Fairfax India

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

By analyzing existing cross correlation between Invesco Advantage MIT and Fairfax India Holdings, you can compare the effects of market volatilities on Invesco Advantage and Fairfax India 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 Advantage with a short position of Fairfax India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Advantage and Fairfax India.

Diversification Opportunities for Invesco Advantage and Fairfax India

0.17

Correlation Coefficient

Invesco Advantage  Fairfax India

Average diversification

The 3 months correlation between Invesco and Fairfax is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Advantage MIT and Fairfax India Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax India Holdings and Invesco Advantage 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 Advantage MIT are associated (or correlated) with Fairfax India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax India Holdings has no effect on the direction of Invesco Advantage i.e., Invesco Advantage and Fairfax India go up and down completely randomly.

Pair Corralation between Invesco Advantage and Fairfax India

Considering the 90-day investment horizon Invesco Advantage is expected to generate 2.92 times less return on investment than Fairfax India. But when comparing it to its historical volatility, Invesco Advantage MIT is 2.29 times less risky than Fairfax India. It trades about 0.09 of its potential returns per unit of risk. Fairfax India Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,423  in Fairfax India Holdings on September 5, 2024 and sell it today you would earn a total of  168.00  from holding Fairfax India Holdings or generate 11.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.82%
Values	Daily Returns

Invesco Advantage MIT  vs.  Fairfax India Holdings

Invesco Advantage MIT

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Advantage MIT are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, Invesco Advantage is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Fairfax India Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax India Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Fairfax India may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco Advantage and Fairfax India

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

The idea behind Invesco Advantage MIT and Fairfax India Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..