Correlation Between Invesco India and IXSE

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

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

Diversification Opportunities for Invesco India and IXSE

-0.12

Correlation Coefficient

Invesco India  IXSE

Good diversification

The 3 months correlation between Invesco and IXSE is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Invesco India ETF and IXSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IXSE and Invesco India 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 India ETF are associated (or correlated) with IXSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IXSE has no effect on the direction of Invesco India i.e., Invesco India and IXSE go up and down completely randomly.

Pair Corralation between Invesco India and IXSE

If you would invest  2,624  in Invesco India ETF on January 26, 2024 and sell it today you would earn a total of  79.00  from holding Invesco India ETF or generate 3.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Invesco India ETF  vs.  IXSE

Invesco India ETF

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco India ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Invesco India is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

IXSE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Invesco India and IXSE

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

The idea behind Invesco India ETF and IXSE 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.