Correlation Between Invesco Global and VanEck Steel

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

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

Diversification Opportunities for Invesco Global and VanEck Steel

-0.24

Correlation Coefficient

Invesco Global  VanEck Steel

Very good diversification

The 3 months correlation between Invesco and VanEck is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Global Clean and VanEck Steel ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Steel ETF and Invesco Global 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 Invesco Global Clean are associated (or correlated) with VanEck Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Steel ETF has no effect on the direction of Invesco Global i.e., Invesco Global and VanEck Steel go up and down completely randomly.

Pair Corralation between Invesco Global and VanEck Steel

Considering the 90-day investment horizon Invesco Global Clean is expected to under-perform the VanEck Steel. In addition to that, Invesco Global is 1.16 times more volatile than VanEck Steel ETF. It trades about -0.05 of its total potential returns per unit of risk. VanEck Steel ETF is currently generating about 0.11 per unit of volatility. If you would invest  5,828  in VanEck Steel ETF on December 27, 2024 and sell it today you would earn a total of  549.00  from holding VanEck Steel ETF or generate 9.42% return on investment over 90 days.

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

Invesco Global Clean  vs.  VanEck Steel ETF

Invesco Global Clean

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Global Clean has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Invesco Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

VanEck Steel ETF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Steel ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, VanEck Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Invesco Global and VanEck Steel

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

The idea behind Invesco Global Clean and VanEck Steel ETF 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 Managers module to screen money managers from public funds and ETFs managed around the world.