Correlation Between VanEck Agribusiness and Invesco SP

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

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

Diversification Opportunities for VanEck Agribusiness and Invesco SP

0.49

Correlation Coefficient

VanEck Agribusiness  Invesco SP

Very weak diversification

The 3 months correlation between VanEck and Invesco is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Agribusiness ETF and Invesco SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP Global and VanEck Agribusiness 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 VanEck Agribusiness ETF 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 Global has no effect on the direction of VanEck Agribusiness i.e., VanEck Agribusiness and Invesco SP go up and down completely randomly.

Pair Corralation between VanEck Agribusiness and Invesco SP

Considering the 90-day investment horizon VanEck Agribusiness ETF is expected to generate 1.13 times more return on investment than Invesco SP. However, VanEck Agribusiness is 1.13 times more volatile than Invesco SP Global. It trades about 0.1 of its potential returns per unit of risk. Invesco SP Global is currently generating about 0.06 per unit of risk. If you would invest  6,429  in VanEck Agribusiness ETF on December 28, 2024 and sell it today you would earn a total of  340.00  from holding VanEck Agribusiness ETF or generate 5.29% return on investment over 90 days.

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

VanEck Agribusiness ETF  vs.  Invesco SP Global

VanEck Agribusiness ETF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Agribusiness ETF are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, VanEck Agribusiness is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Invesco SP Global

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP Global are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, Invesco SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with VanEck Agribusiness and Invesco SP

The main advantage of trading using opposite VanEck Agribusiness and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Agribusiness 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 VanEck Agribusiness ETF and Invesco SP Global 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.