Correlation Between Invesco EQQQ and LG Battery

Can any of the company-specific risk be diversified away by investing in both Invesco EQQQ and LG Battery 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 LG Battery 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 LG Battery Value Chain, you can compare the effects of market volatilities on Invesco EQQQ and LG Battery 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 LG Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco EQQQ and LG Battery.

Diversification Opportunities for Invesco EQQQ and LG Battery

0.69

Correlation Coefficient

Invesco EQQQ  LG Battery

Poor diversification

The 3 months correlation between Invesco and BATT is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Invesco EQQQ NASDAQ 100 and LG Battery Value Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Battery Value 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 LG Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Battery Value has no effect on the direction of Invesco EQQQ i.e., Invesco EQQQ and LG Battery go up and down completely randomly.

Pair Corralation between Invesco EQQQ and LG Battery

Assuming the 90 days trading horizon Invesco EQQQ NASDAQ 100 is expected to generate 0.94 times more return on investment than LG Battery. However, Invesco EQQQ NASDAQ 100 is 1.06 times less risky than LG Battery. It trades about 0.18 of its potential returns per unit of risk. LG Battery Value Chain is currently generating about 0.16 per unit of risk. If you would invest  50,497  in Invesco EQQQ NASDAQ 100 on September 28, 2024 and sell it today you would earn a total of  1,753  from holding Invesco EQQQ NASDAQ 100 or generate 3.47% 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.  LG Battery Value Chain

Invesco EQQQ NASDAQ

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco EQQQ NASDAQ 100 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Invesco EQQQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LG Battery Value

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LG Battery Value Chain are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, LG Battery is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Invesco EQQQ and LG Battery

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

The idea behind Invesco EQQQ NASDAQ 100 and LG Battery Value Chain 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.