Correlation Between Invesco SP and Global X

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

Diversification Opportunities for Invesco SP and Global X

1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between Invesco and Global is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and Global X SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X SP 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X SP has no effect on the direction of Invesco SP i.e., Invesco SP and Global X go up and down completely randomly.

Pair Corralation between Invesco SP and Global X

Considering the 90-day investment horizon Invesco SP 500 is expected to generate 0.92 times more return on investment than Global X. However, Invesco SP 500 is 1.08 times less risky than Global X. It trades about 0.33 of its potential returns per unit of risk. Global X SP is currently generating about 0.3 per unit of risk. If you would invest  2,301  in Invesco SP 500 on September 22, 2024 and sell it today you would earn a total of  64.00  from holding Invesco SP 500 or generate 2.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Invesco SP 500  vs.  Global X SP

 Performance 
       Timeline  
Invesco SP 500 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
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.
Global X SP 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Global X SP are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Global X is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco SP and Global X Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Invesco SP and Global X

The main advantage of trading using opposite Invesco SP and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.
The idea behind Invesco SP 500 and Global X SP 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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