Correlation Between CSIF III and Invesco EQQQ

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

By analyzing existing cross correlation between CSIF III Eq and Invesco EQQQ NASDAQ 100, you can compare the effects of market volatilities on CSIF III and Invesco EQQQ 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 CSIF III with a short position of Invesco EQQQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSIF III and Invesco EQQQ.

Diversification Opportunities for CSIF III and Invesco EQQQ

0.88

Correlation Coefficient

CSIF III  Invesco EQQQ

Very poor diversification

The 3 months correlation between CSIF and Invesco is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding CSIF III Eq and Invesco EQQQ NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco EQQQ NASDAQ and CSIF III 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 CSIF III Eq are associated (or correlated) with Invesco EQQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco EQQQ NASDAQ has no effect on the direction of CSIF III i.e., CSIF III and Invesco EQQQ go up and down completely randomly.

Pair Corralation between CSIF III and Invesco EQQQ

Assuming the 90 days trading horizon CSIF III is expected to generate 2.04 times less return on investment than Invesco EQQQ. But when comparing it to its historical volatility, CSIF III Eq is 1.59 times less risky than Invesco EQQQ. It trades about 0.1 of its potential returns per unit of risk. Invesco EQQQ NASDAQ 100 is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  18,218  in Invesco EQQQ NASDAQ 100 on September 26, 2024 and sell it today you would earn a total of  18,197  from holding Invesco EQQQ NASDAQ 100 or generate 99.88% return on investment over 90 days.

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

CSIF III Eq  vs.  Invesco EQQQ NASDAQ 100

CSIF III Eq

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSIF III Eq are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, CSIF III is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco EQQQ NASDAQ

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco EQQQ NASDAQ 100 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Invesco EQQQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CSIF III and Invesco EQQQ

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

The idea behind CSIF III Eq and Invesco EQQQ NASDAQ 100 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.