Can any of the company-specific risk be diversified away by investing in both Sterling Capital and Invesco FTSE 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 Sterling Capital and Invesco FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Capital Focus and Invesco FTSE RAFI, you can compare the effects of market volatilities on Sterling Capital and Invesco FTSE 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 Sterling Capital with a short position of Invesco FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and Invesco FTSE.
Diversification Opportunities for Sterling Capital and Invesco FTSE
The 3 months correlation between Sterling and Invesco is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Focus and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI and Sterling Capital 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 Sterling Capital Focus are associated (or correlated) with Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of Sterling Capital i.e., Sterling Capital and Invesco FTSE go up and down completely randomly.
Pair Corralation between Sterling Capital and Invesco FTSE
Considering the 90-day investment horizon Sterling Capital Focus is expected to under-perform the Invesco FTSE. In addition to that, Sterling Capital is 1.61 times more volatile than Invesco FTSE RAFI. It trades about -0.18 of its total potential returns per unit of risk. Invesco FTSE RAFI is currently generating about 0.08 per unit of volatility. If you would invest 3,676 in Invesco FTSE RAFI on March 5, 2024 and sell it today you would earn a total of 121.00 from holding Invesco FTSE RAFI or generate 3.29% return on investment over 90 days.
Over the last 90 days Sterling Capital Focus has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco FTSE RAFI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Invesco FTSE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.