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

0.94

Correlation Coefficient

Invesco SP  WisdomTree International

Almost no diversification

The 3 months correlation between Invesco and WisdomTree is 0.94. 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 0.64 times more return on investment than WisdomTree International. However, Invesco SP International is 1.57 times less risky than WisdomTree International. It trades about -0.15 of its potential returns per unit of risk. WisdomTree International Quality is currently generating about -0.1 per unit of risk. If you would invest  3,037  in Invesco SP International on September 17, 2024 and sell it today you would lose (164.00) from holding Invesco SP International or give up 5.4% of portfolio value 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

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. In spite of fairly stable essential indicators, Invesco SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

WisdomTree International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree International Quality has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, WisdomTree International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.