Correlation Between Invesco SP and IQ 500

Can any of the company-specific risk be diversified away by investing in both Invesco SP and IQ 500 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 IQ 500 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 IQ 500 International, you can compare the effects of market volatilities on Invesco SP and IQ 500 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 IQ 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and IQ 500.

Diversification Opportunities for Invesco SP and IQ 500

0.53

Correlation Coefficient

Invesco SP  IQ 500

Very weak diversification

The 3 months correlation between Invesco and IQIN is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP International and IQ 500 International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ 500 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 IQ 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ 500 International has no effect on the direction of Invesco SP i.e., Invesco SP and IQ 500 go up and down completely randomly.

Pair Corralation between Invesco SP and IQ 500

Given the investment horizon of 90 days Invesco SP International is expected to generate 1.15 times more return on investment than IQ 500. However, Invesco SP is 1.15 times more volatile than IQ 500 International. It trades about -0.06 of its potential returns per unit of risk. IQ 500 International is currently generating about -0.1 per unit of risk. If you would invest  3,109  in Invesco SP International on September 12, 2024 and sell it today you would lose (116.00) from holding Invesco SP International or give up 3.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	79.69%
Values	Daily Returns

Invesco SP International  vs.  IQ 500 International

Invesco SP International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Invesco SP is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

IQ 500 International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IQ 500 International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, IQ 500 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 SP and IQ 500

The main advantage of trading using opposite Invesco SP and IQ 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, IQ 500 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 IQ 500 will offset losses from the drop in IQ 500's long position.

The idea behind Invesco SP International and IQ 500 International 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.