Correlation Between Invesco Multi and ProShares Hedge

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

By analyzing existing cross correlation between Invesco Multi Strategy Alternative and ProShares Hedge Replication, you can compare the effects of market volatilities on Invesco Multi and ProShares Hedge 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 Multi with a short position of ProShares Hedge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Multi and ProShares Hedge.

Diversification Opportunities for Invesco Multi and ProShares Hedge

0.88

Correlation Coefficient

Invesco Multi  ProShares Hedge

Very poor diversification

The 3 months correlation between Invesco and ProShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Multi Strategy Alterna and ProShares Hedge Replication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Hedge Repl and Invesco Multi 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 Multi Strategy Alternative are associated (or correlated) with ProShares Hedge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Hedge Repl has no effect on the direction of Invesco Multi i.e., Invesco Multi and ProShares Hedge go up and down completely randomly.

Pair Corralation between Invesco Multi and ProShares Hedge

Given the investment horizon of 90 days Invesco Multi Strategy Alternative is expected to under-perform the ProShares Hedge. But the etf apears to be less risky and, when comparing its historical volatility, Invesco Multi Strategy Alternative is 1.34 times less risky than ProShares Hedge. The etf trades about -0.08 of its potential returns per unit of risk. The ProShares Hedge Replication is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,010  in ProShares Hedge Replication on February 18, 2025 and sell it today you would lose (62.00) from holding ProShares Hedge Replication or give up 1.24% of portfolio value over 90 days.

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

Invesco Multi Strategy Alterna  vs.  ProShares Hedge Replication

Invesco Multi Strategy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Multi Strategy Alternative has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Invesco Multi is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

ProShares Hedge Repl

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Hedge Replication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, ProShares Hedge is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco Multi and ProShares Hedge

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

The idea behind Invesco Multi Strategy Alternative and ProShares Hedge Replication 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.