Correlation Between ALPS Equal and Invesco SP

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

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

Diversification Opportunities for ALPS Equal and Invesco SP

0.89

Correlation Coefficient

ALPS Equal  Invesco SP

Very poor diversification

The 3 months correlation between ALPS and Invesco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ALPS Equal Sector and Invesco SP 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 100 and ALPS Equal 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 ALPS Equal Sector 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 100 has no effect on the direction of ALPS Equal i.e., ALPS Equal and Invesco SP go up and down completely randomly.

Pair Corralation between ALPS Equal and Invesco SP

Considering the 90-day investment horizon ALPS Equal is expected to generate 1.24 times less return on investment than Invesco SP. But when comparing it to its historical volatility, ALPS Equal Sector is 1.04 times less risky than Invesco SP. It trades about 0.09 of its potential returns per unit of risk. Invesco SP 100 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  8,983  in Invesco SP 100 on October 9, 2024 and sell it today you would earn a total of  1,235  from holding Invesco SP 100 or generate 13.75% return on investment over 90 days.

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

ALPS Equal Sector  vs.  Invesco SP 100

ALPS Equal Sector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPS Equal Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, ALPS Equal is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Invesco SP 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP 100 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Invesco SP is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ALPS Equal and Invesco SP

The main advantage of trading using opposite ALPS Equal and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALPS Equal 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 ALPS Equal Sector and Invesco SP 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.