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 500, 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

0.95

Correlation Coefficient

VanEck Agribusiness  Invesco SP

Almost no diversification

The 3 months correlation between VanEck and Invesco is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Agribusiness ETF and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 500 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 under-perform the Invesco SP. But the etf apears to be less risky and, when comparing its historical volatility, VanEck Agribusiness ETF is 1.12 times less risky than Invesco SP. The etf trades about -0.05 of its potential returns per unit of risk. The Invesco SP 500 is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,289  in Invesco SP 500 on October 7, 2024 and sell it today you would lose (64.00) from holding Invesco SP 500 or give up 1.95% of portfolio value over 90 days.

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

VanEck Agribusiness ETF  vs.  Invesco SP 500

VanEck Agribusiness ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Agribusiness ETF 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Invesco SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the ETF 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 500 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.