Correlation Between Virtus ETF and Invesco SP

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

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

Diversification Opportunities for Virtus ETF and Invesco SP

0.94

Correlation Coefficient

Virtus ETF  Invesco SP

Almost no diversification

The 3 months correlation between Virtus and Invesco is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Virtus ETF Trust and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap and Virtus 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 Virtus ETF Trust are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of Virtus ETF i.e., Virtus ETF and Invesco SP go up and down completely randomly.

Pair Corralation between Virtus ETF and Invesco SP

Given the investment horizon of 90 days Virtus ETF Trust is expected to generate 0.87 times more return on investment than Invesco SP. However, Virtus ETF Trust is 1.15 times less risky than Invesco SP. It trades about -0.01 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about -0.1 per unit of risk. If you would invest  3,990  in Virtus ETF Trust on September 12, 2024 and sell it today you would lose (8.00) from holding Virtus ETF Trust or give up 0.2% of portfolio value over 90 days.

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

Virtus ETF Trust  vs.  Invesco SP SmallCap

Virtus ETF Trust

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus ETF Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, Virtus ETF may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco SP SmallCap

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP SmallCap are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very sluggish basic indicators, Invesco SP displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Virtus ETF and Invesco SP

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

The idea behind Virtus ETF Trust and Invesco SP SmallCap 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.