Correlation Between Invesco SP and Invesco Global

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

Diversification Opportunities for Invesco SP and Invesco Global

0.72

Correlation Coefficient

Invesco SP  Invesco Global

Poor diversification

The 3 months correlation between Invesco and Invesco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and Invesco Global Listed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Global Listed 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 Invesco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Global Listed has no effect on the direction of Invesco SP i.e., Invesco SP and Invesco Global go up and down completely randomly.

Pair Corralation between Invesco SP and Invesco Global

Considering the 90-day investment horizon Invesco SP 500 is expected to generate 0.41 times more return on investment than Invesco Global. However, Invesco SP 500 is 2.46 times less risky than Invesco Global. It trades about 0.25 of its potential returns per unit of risk. Invesco Global Listed is currently generating about -0.29 per unit of risk. If you would invest  2,319  in Invesco SP 500 on September 25, 2024 and sell it today you would earn a total of  46.00  from holding Invesco SP 500 or generate 1.98% return on investment over 90 days.

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

Invesco SP 500  vs.  Invesco Global Listed

Invesco SP 500

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 16 (%) 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.

Invesco Global Listed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Global Listed has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Invesco Global is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Invesco SP and Invesco Global

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

The idea behind Invesco SP 500 and Invesco Global Listed 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.