Correlation Between Vanguard and Invesco Russell

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

By analyzing existing cross correlation between Vanguard SP Mid Cap and Invesco Russell 1000, you can compare the effects of market volatilities on Vanguard and Invesco Russell 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 Vanguard with a short position of Invesco Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Invesco Russell.

Diversification Opportunities for Vanguard and Invesco Russell

0.99

Correlation Coefficient

Vanguard  Invesco Russell

No risk reduction

The 3 months correlation between Vanguard and Invesco is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Mid Cap and Invesco Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Russell 1000 and Vanguard 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 Vanguard SP Mid Cap are associated (or correlated) with Invesco Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Russell 1000 has no effect on the direction of Vanguard i.e., Vanguard and Invesco Russell go up and down completely randomly.

Pair Corralation between Vanguard and Invesco Russell

Given the investment horizon of 90 days Vanguard SP Mid Cap is expected to under-perform the Invesco Russell. In addition to that, Vanguard is 1.15 times more volatile than Invesco Russell 1000. It trades about -0.2 of its total potential returns per unit of risk. Invesco Russell 1000 is currently generating about -0.2 per unit of volatility. If you would invest  5,042  in Invesco Russell 1000 on October 11, 2024 and sell it today you would lose (184.00) from holding Invesco Russell 1000 or give up 3.65% of portfolio value over 90 days.

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

Vanguard SP Mid Cap  vs.  Invesco Russell 1000

Vanguard SP Mid

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Vanguard SP Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Invesco Russell 1000

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Invesco Russell 1000 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Invesco Russell is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vanguard and Invesco Russell

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

The idea behind Vanguard SP Mid Cap and Invesco Russell 1000 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.