Correlation Between Fidelity Low and Invesco SP

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

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

Diversification Opportunities for Fidelity Low and Invesco SP

0.82

Correlation Coefficient

Fidelity Low  Invesco SP

Very poor diversification

The 3 months correlation between Fidelity and Invesco is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Low Volatility 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 Fidelity Low 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 Fidelity Low Volatility 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 Fidelity Low i.e., Fidelity Low and Invesco SP go up and down completely randomly.

Pair Corralation between Fidelity Low and Invesco SP

Given the investment horizon of 90 days Fidelity Low Volatility is expected to under-perform the Invesco SP. But the etf apears to be less risky and, when comparing its historical volatility, Fidelity Low Volatility is 1.26 times less risky than Invesco SP. The etf trades about -0.01 of its potential returns per unit of risk. The Invesco SP 500 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,016  in Invesco SP 500 on October 21, 2024 and sell it today you would earn a total of  74.00  from holding Invesco SP 500 or generate 1.05% return on investment over 90 days.

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

Fidelity Low Volatility  vs.  Invesco SP 500

Fidelity Low Volatility

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Low Volatility has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Fidelity Low 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

0 of 100

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Invesco SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fidelity Low and Invesco SP

The main advantage of trading using opposite Fidelity Low and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Low 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 Fidelity Low Volatility 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.

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.