Correlation Between Invesco Water and Proshares

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

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

Diversification Opportunities for Invesco Water and Proshares

0.73

Correlation Coefficient

Invesco Water  Proshares

Poor diversification

The 3 months correlation between Invesco and Proshares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Water Resources and Proshares SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proshares SP Global and Invesco Water 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 Water Resources are associated (or correlated) with Proshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proshares SP Global has no effect on the direction of Invesco Water i.e., Invesco Water and Proshares go up and down completely randomly.

Pair Corralation between Invesco Water and Proshares

Considering the 90-day investment horizon Invesco Water Resources is expected to generate 0.58 times more return on investment than Proshares. However, Invesco Water Resources is 1.73 times less risky than Proshares. It trades about 0.05 of its potential returns per unit of risk. Proshares SP Global is currently generating about -0.05 per unit of risk. If you would invest  5,236  in Invesco Water Resources on October 11, 2024 and sell it today you would earn a total of  1,312  from holding Invesco Water Resources or generate 25.06% return on investment over 90 days.

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

Invesco Water Resources  vs.  Proshares SP Global

Invesco Water Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Water Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Proshares SP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Proshares SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Invesco Water and Proshares

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

The idea behind Invesco Water Resources and Proshares SP Global 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.