Correlation Between Invesco SP and International Drawdown

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

By analyzing existing cross correlation between Invesco SP 500 and International Drawdown Managed, you can compare the effects of market volatilities on Invesco SP and International Drawdown 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 SP with a short position of International Drawdown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and International Drawdown.

Diversification Opportunities for Invesco SP and International Drawdown

-0.61

Correlation Coefficient

Invesco SP  International Drawdown

Excellent diversification

The 3 months correlation between Invesco and International is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and International Drawdown Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Drawdown and Invesco SP 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 SP 500 are associated (or correlated) with International Drawdown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Drawdown has no effect on the direction of Invesco SP i.e., Invesco SP and International Drawdown go up and down completely randomly.

Pair Corralation between Invesco SP and International Drawdown

Considering the 90-day investment horizon Invesco SP 500 is expected to generate 1.31 times more return on investment than International Drawdown. However, Invesco SP is 1.31 times more volatile than International Drawdown Managed. It trades about 0.07 of its potential returns per unit of risk. International Drawdown Managed is currently generating about 0.04 per unit of risk. If you would invest  1,775  in Invesco SP 500 on September 21, 2024 and sell it today you would earn a total of  590.00  from holding Invesco SP 500 or generate 33.24% return on investment over 90 days.

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

Invesco SP 500  vs.  International Drawdown Managed

Invesco SP 500

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Invesco SP is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

International Drawdown

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Drawdown Managed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, International Drawdown is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco SP and International Drawdown

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

The idea behind Invesco SP 500 and International Drawdown Managed 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.