Correlation Between Invesco High and NXG NextGen

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

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

Diversification Opportunities for Invesco High and NXG NextGen

0.68

Correlation Coefficient

Invesco High  NXG NextGen

Poor diversification

The 3 months correlation between Invesco and NXG is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Invesco High Income and NXG NextGen Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXG NextGen Infrastr and Invesco High 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 High Income are associated (or correlated) with NXG NextGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXG NextGen Infrastr has no effect on the direction of Invesco High i.e., Invesco High and NXG NextGen go up and down completely randomly.

Pair Corralation between Invesco High and NXG NextGen

Given the investment horizon of 90 days Invesco High is expected to generate 2.99 times less return on investment than NXG NextGen. But when comparing it to its historical volatility, Invesco High Income is 4.06 times less risky than NXG NextGen. It trades about 0.08 of its potential returns per unit of risk. NXG NextGen Infrastructure is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,803  in NXG NextGen Infrastructure on June 23, 2024 and sell it today you would earn a total of  203.00  from holding NXG NextGen Infrastructure or generate 5.34% return on investment over 90 days.

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

Invesco High Income  vs.  NXG NextGen Infrastructure

Invesco High Income

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco High Income are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Invesco High is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

NXG NextGen Infrastr

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NXG NextGen Infrastructure are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NXG NextGen is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco High and NXG NextGen

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

The idea behind Invesco High Income and NXG NextGen Infrastructure 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.