Correlation Between WisdomTree and Invesco Advantage

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

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

Diversification Opportunities for WisdomTree and Invesco Advantage

0.45

Correlation Coefficient

WisdomTree  Invesco Advantage

Very weak diversification

The 3 months correlation between WisdomTree and Invesco is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree and Invesco Advantage MIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Advantage MIT and WisdomTree 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 WisdomTree are associated (or correlated) with Invesco Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Advantage MIT has no effect on the direction of WisdomTree i.e., WisdomTree and Invesco Advantage go up and down completely randomly.

Pair Corralation between WisdomTree and Invesco Advantage

Allowing for the 90-day total investment horizon WisdomTree is expected to generate 2.27 times more return on investment than Invesco Advantage. However, WisdomTree is 2.27 times more volatile than Invesco Advantage MIT. It trades about 0.12 of its potential returns per unit of risk. Invesco Advantage MIT is currently generating about 0.05 per unit of risk. If you would invest  853.00  in WisdomTree on March 13, 2024 and sell it today you would earn a total of  109.00  from holding WisdomTree or generate 12.78% return on investment over 90 days.

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

WisdomTree  vs.  Invesco Advantage MIT

WisdomTree

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, WisdomTree unveiled solid returns over the last few months and may actually be approaching a breakup point.

Invesco Advantage MIT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Advantage MIT are ranked lower than 3 (%) 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 current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with WisdomTree and Invesco Advantage

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

The idea behind WisdomTree and Invesco Advantage MIT 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..