Correlation Between Amplify ETF and Invesco Solar

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

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

Diversification Opportunities for Amplify ETF and Invesco Solar

0.61

Correlation Coefficient

Amplify ETF  Invesco Solar

Poor diversification

The 3 months correlation between Amplify and Invesco is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Amplify ETF Trust and Invesco Solar ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Solar ETF and Amplify ETF 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 Amplify ETF Trust are associated (or correlated) with Invesco Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Solar ETF has no effect on the direction of Amplify ETF i.e., Amplify ETF and Invesco Solar go up and down completely randomly.

Pair Corralation between Amplify ETF and Invesco Solar

Given the investment horizon of 90 days Amplify ETF Trust is expected to under-perform the Invesco Solar. But the etf apears to be less risky and, when comparing its historical volatility, Amplify ETF Trust is 1.37 times less risky than Invesco Solar. The etf trades about -0.09 of its potential returns per unit of risk. The Invesco Solar ETF is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,362  in Invesco Solar ETF on December 29, 2024 and sell it today you would lose (261.00) from holding Invesco Solar ETF or give up 7.76% of portfolio value over 90 days.

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

Amplify ETF Trust  vs.  Invesco Solar ETF

Amplify ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amplify ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Invesco Solar ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Solar ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Amplify ETF and Invesco Solar

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

The idea behind Amplify ETF Trust and Invesco Solar ETF 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.