Correlation Between TRON and Invesco Small

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

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

Diversification Opportunities for TRON and Invesco Small

-0.12

Correlation Coefficient

TRON  Invesco Small

Good diversification

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

Pair Corralation between TRON and Invesco Small

Assuming the 90 days trading horizon TRON is expected to under-perform the Invesco Small. In addition to that, TRON is 1.73 times more volatile than Invesco Small Cap. It trades about -0.21 of its total potential returns per unit of risk. Invesco Small Cap is currently generating about -0.05 per unit of volatility. If you would invest  2,219  in Invesco Small Cap on January 25, 2024 and sell it today you would lose (27.00) from holding Invesco Small Cap or give up 1.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

TRON  vs.  Invesco Small Cap

TRON

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TRON are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, TRON is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Small Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Small may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with TRON and Invesco Small

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

The idea behind TRON and Invesco Small Cap 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.