Correlation Between Invesco SP and Invesco KBW

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

By analyzing existing cross correlation between Invesco SP SmallCap and Invesco KBW Regional, you can compare the effects of market volatilities on Invesco SP and Invesco KBW 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 KBW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Invesco KBW.

Diversification Opportunities for Invesco SP and Invesco KBW

0.96

Correlation Coefficient

Invesco SP  Invesco KBW

Almost no diversification

The 3 months correlation between Invesco and Invesco is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP SmallCap and Invesco KBW Regional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco KBW Regional 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 SmallCap are associated (or correlated) with Invesco KBW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco KBW Regional has no effect on the direction of Invesco SP i.e., Invesco SP and Invesco KBW go up and down completely randomly.

Pair Corralation between Invesco SP and Invesco KBW

Given the investment horizon of 90 days Invesco SP SmallCap is expected to generate 0.82 times more return on investment than Invesco KBW. However, Invesco SP SmallCap is 1.22 times less risky than Invesco KBW. It trades about -0.12 of its potential returns per unit of risk. Invesco KBW Regional is currently generating about -0.11 per unit of risk. If you would invest  6,042  in Invesco SP SmallCap on November 28, 2024 and sell it today you would lose (527.00) from holding Invesco SP SmallCap or give up 8.72% of portfolio value over 90 days.

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

Invesco SP SmallCap  vs.  Invesco KBW Regional

Invesco SP SmallCap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP SmallCap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Etf's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Invesco KBW Regional

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco KBW Regional has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with Invesco SP and Invesco KBW

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

The idea behind Invesco SP SmallCap and Invesco KBW Regional 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.