Correlation Between VanEck Video and Invesco SP

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

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

Diversification Opportunities for VanEck Video and Invesco SP

0.87

Correlation Coefficient

VanEck Video  Invesco SP

Very poor diversification

The 3 months correlation between VanEck and Invesco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Video Gaming 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 VanEck Video 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 VanEck Video Gaming 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 VanEck Video i.e., VanEck Video and Invesco SP go up and down completely randomly.

Pair Corralation between VanEck Video and Invesco SP

Given the investment horizon of 90 days VanEck Video Gaming is expected to generate 1.69 times more return on investment than Invesco SP. However, VanEck Video is 1.69 times more volatile than Invesco SP 500. It trades about 0.06 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.04 per unit of risk. If you would invest  8,409  in VanEck Video Gaming on December 29, 2024 and sell it today you would earn a total of  365.00  from holding VanEck Video Gaming or generate 4.34% return on investment over 90 days.

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

VanEck Video Gaming  vs.  Invesco SP 500

VanEck Video Gaming

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Video Gaming are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, VanEck Video is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Invesco SP 500

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Invesco SP is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with VanEck Video and Invesco SP

The main advantage of trading using opposite VanEck Video and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Video 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 VanEck Video Gaming 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.