Correlation Between Invesco EQQQ and Invesco SP

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

By analyzing existing cross correlation between Invesco EQQQ NASDAQ 100 and Invesco SP 500, you can compare the effects of market volatilities on Invesco EQQQ 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 Invesco EQQQ with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco EQQQ and Invesco SP.

Diversification Opportunities for Invesco EQQQ and Invesco SP

0.66

Correlation Coefficient

Invesco EQQQ  Invesco SP

Poor diversification

The 3 months correlation between Invesco and Invesco is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Invesco EQQQ NASDAQ 100 and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 and Invesco EQQQ 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 EQQQ NASDAQ 100 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 500 has no effect on the direction of Invesco EQQQ i.e., Invesco EQQQ and Invesco SP go up and down completely randomly.

Pair Corralation between Invesco EQQQ and Invesco SP

Assuming the 90 days trading horizon Invesco EQQQ NASDAQ 100 is expected to generate 1.39 times more return on investment than Invesco SP. However, Invesco EQQQ is 1.39 times more volatile than Invesco SP 500. It trades about 0.2 of its potential returns per unit of risk. Invesco SP 500 is currently generating about -0.37 per unit of risk. If you would invest  48,744  in Invesco EQQQ NASDAQ 100 on September 27, 2024 and sell it today you would earn a total of  1,986  from holding Invesco EQQQ NASDAQ 100 or generate 4.07% return on investment over 90 days.

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

Invesco EQQQ NASDAQ 100  vs.  Invesco SP 500

Invesco EQQQ NASDAQ

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco EQQQ NASDAQ 100 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Invesco EQQQ sustained solid returns over the last few months and may actually be approaching a breakup point.

Invesco SP 500

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Invesco SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco EQQQ and Invesco SP

The main advantage of trading using opposite Invesco EQQQ and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco EQQQ 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 Invesco EQQQ NASDAQ 100 and Invesco SP 500 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.