Correlation Between Invesco Dynamic and Northern Lights

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

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

Diversification Opportunities for Invesco Dynamic and Northern Lights

0.43

Correlation Coefficient

Invesco Dynamic  Northern Lights

Very weak diversification

The 3 months correlation between Invesco and Northern is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Large and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Invesco Dynamic 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 Dynamic Large are associated (or correlated) with Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Invesco Dynamic i.e., Invesco Dynamic and Northern Lights go up and down completely randomly.

Pair Corralation between Invesco Dynamic and Northern Lights

Considering the 90-day investment horizon Invesco Dynamic Large is expected to under-perform the Northern Lights. In addition to that, Invesco Dynamic is 1.29 times more volatile than Northern Lights. It trades about -0.16 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.24 per unit of volatility. If you would invest  3,168  in Northern Lights on March 14, 2024 and sell it today you would earn a total of  86.00  from holding Northern Lights or generate 2.71% return on investment over 90 days.

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

Invesco Dynamic Large  vs.  Northern Lights

Invesco Dynamic Large

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Large are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Invesco Dynamic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Northern Lights

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Northern Lights is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco Dynamic and Northern Lights

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

The idea behind Invesco Dynamic Large and Northern Lights 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .