Correlation Between EGSHARES BLUE and Invesco Solar

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

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

Diversification Opportunities for EGSHARES BLUE and Invesco Solar

0.47

Correlation Coefficient

EGSHARES BLUE  Invesco Solar

Very weak diversification

The 3 months correlation between EGSHARES and Invesco is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding EGSHARES BLUE CHIP and Invesco Solar ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Solar ETF and EGSHARES BLUE 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 EGSHARES BLUE CHIP are associated (or correlated) with Invesco Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Solar ETF has no effect on the direction of EGSHARES BLUE i.e., EGSHARES BLUE and Invesco Solar go up and down completely randomly.

Pair Corralation between EGSHARES BLUE and Invesco Solar

Given the investment horizon of 90 days EGSHARES BLUE CHIP is expected to generate 1.05 times more return on investment than Invesco Solar. However, EGSHARES BLUE is 1.05 times more volatile than Invesco Solar ETF. It trades about -0.04 of its potential returns per unit of risk. Invesco Solar ETF is currently generating about -0.06 per unit of risk. If you would invest  3,430  in EGSHARES BLUE CHIP on December 29, 2024 and sell it today you would lose (213.00) from holding EGSHARES BLUE CHIP or give up 6.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

EGSHARES BLUE CHIP  vs.  Invesco Solar ETF

EGSHARES BLUE CHIP

Risk-Adjusted Performance

Very Weak

Over the last 90 days EGSHARES BLUE CHIP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, EGSHARES BLUE is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Invesco Solar ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Solar ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with EGSHARES BLUE and Invesco Solar

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

The idea behind EGSHARES BLUE CHIP and Invesco Solar ETF 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.