Correlation Between Invesco Global and VanEck Low

Can any of the company-specific risk be diversified away by investing in both Invesco Global and VanEck Low 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 Low 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 Low Carbon, you can compare the effects of market volatilities on Invesco Global and VanEck Low 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 Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Global and VanEck Low.

Diversification Opportunities for Invesco Global and VanEck Low

0.24

Correlation Coefficient

Invesco Global  VanEck Low

Modest 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 Low Carbon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Low Carbon 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 Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Low Carbon has no effect on the direction of Invesco Global i.e., Invesco Global and VanEck Low go up and down completely randomly.

Pair Corralation between Invesco Global and VanEck Low

Considering the 90-day investment horizon Invesco Global Clean is expected to under-perform the VanEck Low. In addition to that, Invesco Global is 1.32 times more volatile than VanEck Low Carbon. It trades about -0.05 of its total potential returns per unit of risk. VanEck Low Carbon is currently generating about 0.04 per unit of volatility. If you would invest  10,067  in VanEck Low Carbon on December 27, 2024 and sell it today you would earn a total of  220.00  from holding VanEck Low Carbon or generate 2.19% return on investment over 90 days.

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

Invesco Global Clean  vs.  VanEck Low Carbon

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 Low Carbon

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Low Carbon are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, VanEck Low is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco Global and VanEck Low

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

The idea behind Invesco Global Clean and VanEck Low Carbon 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.