Correlation Between Dimensional Targeted and Invesco SP

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

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

Diversification Opportunities for Dimensional Targeted and Invesco SP

0.96

Correlation Coefficient

Dimensional Targeted  Invesco SP

Almost no diversification

The 3 months correlation between Dimensional and Invesco is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Targeted Value and Invesco SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP MidCap and Dimensional Targeted 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 Dimensional Targeted Value 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 MidCap has no effect on the direction of Dimensional Targeted i.e., Dimensional Targeted and Invesco SP go up and down completely randomly.

Pair Corralation between Dimensional Targeted and Invesco SP

Given the investment horizon of 90 days Dimensional Targeted Value is expected to under-perform the Invesco SP. But the etf apears to be less risky and, when comparing its historical volatility, Dimensional Targeted Value is 1.04 times less risky than Invesco SP. The etf trades about -0.1 of its potential returns per unit of risk. The Invesco SP MidCap is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  5,492  in Invesco SP MidCap on December 30, 2024 and sell it today you would lose (235.00) from holding Invesco SP MidCap or give up 4.28% of portfolio value over 90 days.

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

Dimensional Targeted Value  vs.  Invesco SP MidCap

Dimensional Targeted

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dimensional Targeted Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Invesco SP MidCap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP MidCap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Invesco SP is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dimensional Targeted and Invesco SP

The main advantage of trading using opposite Dimensional Targeted and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Targeted 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 Dimensional Targeted Value and Invesco SP MidCap 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.