Correlation Between Invesco International and Global X

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

By analyzing existing cross correlation between Invesco International Dividend and Global X Alternative, you can compare the effects of market volatilities on Invesco International and Global X 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 International with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco International and Global X.

Diversification Opportunities for Invesco International and Global X

0.89

Correlation Coefficient

Invesco International  Global X

Very poor diversification

The 3 months correlation between Invesco and Global is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Invesco International Dividend and Global X Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Alternative and Invesco International 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 International Dividend are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Alternative has no effect on the direction of Invesco International i.e., Invesco International and Global X go up and down completely randomly.

Pair Corralation between Invesco International and Global X

Considering the 90-day investment horizon Invesco International Dividend is expected to under-perform the Global X. In addition to that, Invesco International is 2.05 times more volatile than Global X Alternative. It trades about -0.3 of its total potential returns per unit of risk. Global X Alternative is currently generating about -0.08 per unit of volatility. If you would invest  1,134  in Global X Alternative on March 16, 2024 and sell it today you would lose (7.99) from holding Global X Alternative or give up 0.7% of portfolio value over 90 days.

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

Invesco International Dividend  vs.  Global X Alternative

Invesco International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco International Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Invesco International is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Global X Alternative

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Alternative are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Global X is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco International and Global X

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

The idea behind Invesco International Dividend and Global X Alternative 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.