Correlation Between Invesco Dynamic and Redwood Managed

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

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

Diversification Opportunities for Invesco Dynamic and Redwood Managed

0.57

Correlation Coefficient

Invesco Dynamic  Redwood Managed

Very weak diversification

The 3 months correlation between Invesco and Redwood is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Oil and Redwood Managed Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Managed Vola and Invesco Dynamic 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 Dynamic Oil are associated (or correlated) with Redwood Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwood Managed Vola has no effect on the direction of Invesco Dynamic i.e., Invesco Dynamic and Redwood Managed go up and down completely randomly.

Pair Corralation between Invesco Dynamic and Redwood Managed

Considering the 90-day investment horizon Invesco Dynamic Oil is expected to under-perform the Redwood Managed. In addition to that, Invesco Dynamic is 4.43 times more volatile than Redwood Managed Volatility. It trades about -0.17 of its total potential returns per unit of risk. Redwood Managed Volatility is currently generating about 0.09 per unit of volatility. If you would invest  1,132  in Redwood Managed Volatility on February 6, 2024 and sell it today you would earn a total of  6.00  from holding Redwood Managed Volatility or generate 0.53% return on investment over 90 days.

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

Invesco Dynamic Oil  vs.  Redwood Managed Volatility

Invesco Dynamic Oil

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Oil are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Invesco Dynamic may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Redwood Managed Vola

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Redwood Managed Volatility are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Redwood Managed 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 Dynamic and Redwood Managed

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

The idea behind Invesco Dynamic Oil and Redwood Managed Volatility 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.