Correlation Between Avantis Emerging and Invesco SP

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

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

Diversification Opportunities for Avantis Emerging and Invesco SP

-0.4

Correlation Coefficient

Avantis Emerging  Invesco SP

Very good diversification

The 3 months correlation between Avantis and Invesco is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Emerging Markets and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap and Avantis Emerging 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 Avantis Emerging Markets are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of Avantis Emerging i.e., Avantis Emerging and Invesco SP go up and down completely randomly.

Pair Corralation between Avantis Emerging and Invesco SP

Given the investment horizon of 90 days Avantis Emerging Markets is expected to generate 0.96 times more return on investment than Invesco SP. However, Avantis Emerging Markets is 1.04 times less risky than Invesco SP. It trades about 0.21 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about 0.18 per unit of risk. If you would invest  6,029  in Avantis Emerging Markets on September 16, 2024 and sell it today you would earn a total of  171.00  from holding Avantis Emerging Markets or generate 2.84% return on investment over 90 days.

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

Avantis Emerging Markets  vs.  Invesco SP SmallCap

Avantis Emerging Markets

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Emerging Markets are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Avantis Emerging is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Invesco SP SmallCap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP SmallCap are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Invesco SP is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Avantis Emerging and Invesco SP

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

The idea behind Avantis Emerging Markets and Invesco SP SmallCap 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.