Correlation Between Invesco SP and Desjardins

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

By analyzing existing cross correlation between Invesco SP 500 and Desjardins RI Global, you can compare the effects of market volatilities on Invesco SP and Desjardins 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 SP with a short position of Desjardins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Desjardins.

Diversification Opportunities for Invesco SP and Desjardins

0.9

Correlation Coefficient

Invesco SP  Desjardins

Almost no diversification

The 3 months correlation between Invesco and Desjardins is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and Desjardins RI Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI Global and Invesco SP 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 SP 500 are associated (or correlated) with Desjardins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins RI Global has no effect on the direction of Invesco SP i.e., Invesco SP and Desjardins go up and down completely randomly.

Pair Corralation between Invesco SP and Desjardins

Assuming the 90 days trading horizon Invesco SP is expected to generate 1.39 times less return on investment than Desjardins. In addition to that, Invesco SP is 1.0 times more volatile than Desjardins RI Global. It trades about 0.16 of its total potential returns per unit of risk. Desjardins RI Global is currently generating about 0.23 per unit of volatility. If you would invest  2,833  in Desjardins RI Global on September 2, 2024 and sell it today you would earn a total of  298.00  from holding Desjardins RI Global or generate 10.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Invesco SP 500  vs.  Desjardins RI Global

Invesco SP 500

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Desjardins RI Global

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins RI Global are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Desjardins may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco SP and Desjardins

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

The idea behind Invesco SP 500 and Desjardins RI Global 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.