Correlation Between VanEck Environmental and Invesco Solar

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

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

Diversification Opportunities for VanEck Environmental and Invesco Solar

-0.02

Correlation Coefficient

VanEck Environmental  Invesco Solar

Good diversification

The 3 months correlation between VanEck and Invesco is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Environmental Services and Invesco Solar ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Solar ETF and VanEck Environmental 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 Environmental Services are associated (or correlated) with Invesco Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Solar ETF has no effect on the direction of VanEck Environmental i.e., VanEck Environmental and Invesco Solar go up and down completely randomly.

Pair Corralation between VanEck Environmental and Invesco Solar

Considering the 90-day investment horizon VanEck Environmental Services is expected to generate 0.43 times more return on investment than Invesco Solar. However, VanEck Environmental Services is 2.33 times less risky than Invesco Solar. It trades about 0.07 of its potential returns per unit of risk. Invesco Solar ETF is currently generating about -0.05 per unit of risk. If you would invest  3,432  in VanEck Environmental Services on December 28, 2024 and sell it today you would earn a total of  119.00  from holding VanEck Environmental Services or generate 3.47% return on investment over 90 days.

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

VanEck Environmental Services  vs.  Invesco Solar ETF

VanEck Environmental

Risk-Adjusted Performance

Modest

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

Invesco Solar ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Solar ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with VanEck Environmental and Invesco Solar

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

The idea behind VanEck Environmental Services and Invesco Solar ETF 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.