Correlation Between Invesco SP and WisdomTree International

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

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

Diversification Opportunities for Invesco SP and WisdomTree International

0.97

Correlation Coefficient

Invesco SP  WisdomTree International

Almost no diversification

The 3 months correlation between Invesco and WisdomTree is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP International and WisdomTree International Quali in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and Invesco SP 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 SP International are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of Invesco SP i.e., Invesco SP and WisdomTree International go up and down completely randomly.

Pair Corralation between Invesco SP and WisdomTree International

Given the investment horizon of 90 days Invesco SP International is expected to generate 0.94 times more return on investment than WisdomTree International. However, Invesco SP International is 1.07 times less risky than WisdomTree International. It trades about 0.14 of its potential returns per unit of risk. WisdomTree International Quality is currently generating about 0.11 per unit of risk. If you would invest  2,816  in Invesco SP International on December 29, 2024 and sell it today you would earn a total of  214.00  from holding Invesco SP International or generate 7.6% return on investment over 90 days.

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

Invesco SP International  vs.  WisdomTree International Quali

Invesco SP International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in April 2025.

WisdomTree International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International Quality are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, WisdomTree International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Invesco SP and WisdomTree International

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

The idea behind Invesco SP International and WisdomTree International Quality 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.