Correlation Between Invesco CurrencyShares and United States

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

By analyzing existing cross correlation between Invesco CurrencyShares Japanese and United States Brent, you can compare the effects of market volatilities on Invesco CurrencyShares and United States 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 CurrencyShares with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco CurrencyShares and United States.

Diversification Opportunities for Invesco CurrencyShares and United States

-0.77

Correlation Coefficient

Invesco CurrencyShares  United States

Pay attention - limited upside

The 3 months correlation between Invesco and United is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes and United States Brent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Brent and Invesco CurrencyShares 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 CurrencyShares Japanese are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Brent has no effect on the direction of Invesco CurrencyShares i.e., Invesco CurrencyShares and United States go up and down completely randomly.

Pair Corralation between Invesco CurrencyShares and United States

Considering the 90-day investment horizon Invesco CurrencyShares Japanese is expected to under-perform the United States. But the etf apears to be less risky and, when comparing its historical volatility, Invesco CurrencyShares Japanese is 2.8 times less risky than United States. The etf trades about -0.05 of its potential returns per unit of risk. The United States Brent is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,066  in United States Brent on January 31, 2024 and sell it today you would earn a total of  177.00  from holding United States Brent or generate 5.77% return on investment over 90 days.

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

Invesco CurrencyShares Japanes  vs.  United States Brent

Invesco CurrencyShares

Risk-Adjusted Performance

0 of 100

Very Weak

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

United States Brent

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Brent are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, United States may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Invesco CurrencyShares and United States

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

The idea behind Invesco CurrencyShares Japanese and United States Brent 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.