Correlation Between Invesco Advantage and Invesco California

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

Diversification Opportunities for Invesco Advantage and Invesco California

0.84

Correlation Coefficient

Invesco Advantage  Invesco California

Very poor diversification

The 3 months correlation between Invesco and Invesco is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Advantage MIT and Invesco California Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco California Value 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 Invesco California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco California Value has no effect on the direction of Invesco Advantage i.e., Invesco Advantage and Invesco California go up and down completely randomly.

Pair Corralation between Invesco Advantage and Invesco California

Considering the 90-day investment horizon Invesco Advantage is expected to generate 2.28 times less return on investment than Invesco California. In addition to that, Invesco Advantage is 1.32 times more volatile than Invesco California Value. It trades about 0.04 of its total potential returns per unit of risk. Invesco California Value is currently generating about 0.11 per unit of volatility. If you would invest  967.00  in Invesco California Value on March 4, 2024 and sell it today you would earn a total of  40.00  from holding Invesco California Value or generate 4.14% return on investment over 90 days.

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

Invesco Advantage MIT  vs.  Invesco California Value

Invesco Advantage MIT

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Advantage MIT are ranked lower than 2 (%) 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.

Invesco California Value

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco California Value are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Invesco California is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Invesco Advantage and Invesco California

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

The idea behind Invesco Advantage MIT and Invesco California Value 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.