Correlation Between FlexShares STOXX and Invesco SP

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

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

Diversification Opportunities for FlexShares STOXX and Invesco SP

0.89

Correlation Coefficient

FlexShares STOXX  Invesco SP

Very poor diversification

The 3 months correlation between FlexShares and Invesco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global 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 FlexShares STOXX 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 FlexShares STOXX Global 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 FlexShares STOXX i.e., FlexShares STOXX and Invesco SP go up and down completely randomly.

Pair Corralation between FlexShares STOXX and Invesco SP

Given the investment horizon of 90 days FlexShares STOXX Global is expected to generate 0.82 times more return on investment than Invesco SP. However, FlexShares STOXX Global is 1.22 times less risky than Invesco SP. It trades about 0.16 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  5,399  in FlexShares STOXX Global on December 29, 2024 and sell it today you would earn a total of  347.00  from holding FlexShares STOXX Global or generate 6.43% return on investment over 90 days.

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

FlexShares STOXX Global  vs.  Invesco SP Global

FlexShares STOXX Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares STOXX Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FlexShares STOXX may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 FlexShares STOXX and Invesco SP

The main advantage of trading using opposite FlexShares STOXX and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares STOXX 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 FlexShares STOXX Global 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.