Correlation Between Invesco Variable and Alcoa Corp

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

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

Diversification Opportunities for Invesco Variable and Alcoa Corp

0.6

Correlation Coefficient

Invesco Variable  Alcoa Corp

Poor diversification

The 3 months correlation between Invesco and Alcoa is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Variable Rate and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Invesco Variable 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 Variable Rate are associated (or correlated) with Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Invesco Variable i.e., Invesco Variable and Alcoa Corp go up and down completely randomly.

Pair Corralation between Invesco Variable and Alcoa Corp

Considering the 90-day investment horizon Invesco Variable Rate is expected to under-perform the Alcoa Corp. But the etf apears to be less risky and, when comparing its historical volatility, Invesco Variable Rate is 9.59 times less risky than Alcoa Corp. The etf trades about -0.16 of its potential returns per unit of risk. The Alcoa Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,402  in Alcoa Corp on January 30, 2024 and sell it today you would earn a total of  286.00  from holding Alcoa Corp or generate 8.41% return on investment over 90 days.

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

Invesco Variable Rate  vs.  Alcoa Corp

Invesco Variable Rate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Variable Rate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Invesco Variable is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Alcoa Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Variable and Alcoa Corp

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

The idea behind Invesco Variable Rate and Alcoa Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.