Correlation Between Invesco CurrencyShares and Vanguard

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

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

Diversification Opportunities for Invesco CurrencyShares and Vanguard

0.55

Correlation Coefficient

Invesco CurrencyShares  Vanguard

Very weak diversification

The 3 months correlation between Invesco and Vanguard is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and Invesco CurrencyShares 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 CurrencyShares Japanese are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Invesco CurrencyShares i.e., Invesco CurrencyShares and Vanguard go up and down completely randomly.

Pair Corralation between Invesco CurrencyShares and Vanguard

Considering the 90-day investment horizon Invesco CurrencyShares is expected to generate 2.35 times less return on investment than Vanguard. But when comparing it to its historical volatility, Invesco CurrencyShares Japanese is 1.32 times less risky than Vanguard. It trades about 0.04 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  54,097  in Vanguard SP 500 on November 19, 2024 and sell it today you would earn a total of  1,972  from holding Vanguard SP 500 or generate 3.65% return on investment over 90 days.

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

Invesco CurrencyShares Japanes  vs.  Vanguard SP 500

Invesco CurrencyShares

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco CurrencyShares Japanese are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Invesco CurrencyShares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Vanguard SP 500

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco CurrencyShares and Vanguard

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

The idea behind Invesco CurrencyShares Japanese and Vanguard 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.