Correlation Between Themes Transatlantic and Invesco SP

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

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

Diversification Opportunities for Themes Transatlantic and Invesco SP

0.72

Correlation Coefficient

Themes Transatlantic  Invesco SP

Poor diversification

The 3 months correlation between Themes and Invesco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Themes Transatlantic Defense 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 Themes Transatlantic 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 Themes Transatlantic Defense 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 Themes Transatlantic i.e., Themes Transatlantic and Invesco SP go up and down completely randomly.

Pair Corralation between Themes Transatlantic and Invesco SP

Given the investment horizon of 90 days Themes Transatlantic Defense is expected to generate 1.54 times more return on investment than Invesco SP. However, Themes Transatlantic is 1.54 times more volatile than Invesco SP Global. It trades about 0.18 of its potential returns per unit of risk. Invesco SP Global is currently generating about 0.05 per unit of risk. If you would invest  2,571  in Themes Transatlantic Defense on December 27, 2024 and sell it today you would earn a total of  374.00  from holding Themes Transatlantic Defense or generate 14.55% return on investment over 90 days.

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

Themes Transatlantic Defense  vs.  Invesco SP Global

Themes Transatlantic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Transatlantic Defense are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Themes Transatlantic displayed solid returns over the last few months and may actually be approaching a breakup point.

Invesco SP Global

Risk-Adjusted Performance

Insignificant

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 Themes Transatlantic and Invesco SP

The main advantage of trading using opposite Themes Transatlantic and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Themes Transatlantic 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 Themes Transatlantic Defense 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.