Correlation Between Invesco Advantage and Royce Value

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

Diversification Opportunities for Invesco Advantage and Royce Value

0.09

Correlation Coefficient

Invesco Advantage  Royce Value

Significant diversification

The 3 months correlation between Invesco and Royce is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Advantage MIT and Royce Value Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Value Closed 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 Royce Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Value Closed has no effect on the direction of Invesco Advantage i.e., Invesco Advantage and Royce Value go up and down completely randomly.

Pair Corralation between Invesco Advantage and Royce Value

Considering the 90-day investment horizon Invesco Advantage is expected to generate 3.41 times less return on investment than Royce Value. But when comparing it to its historical volatility, Invesco Advantage MIT is 2.23 times less risky than Royce Value. It trades about 0.1 of its potential returns per unit of risk. Royce Value Closed is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,478  in Royce Value Closed on September 1, 2024 and sell it today you would earn a total of  187.00  from holding Royce Value Closed or generate 12.65% return on investment over 90 days.

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

Invesco Advantage MIT  vs.  Royce Value Closed

Invesco Advantage MIT

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Advantage MIT are ranked lower than 8 (%) 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.

Royce Value Closed

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Value Closed are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Royce Value may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Invesco Advantage and Royce Value

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

The idea behind Invesco Advantage MIT and Royce Value Closed 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.