Correlation Between Invesco QQQ and Vanguard Tax

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

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

Diversification Opportunities for Invesco QQQ and Vanguard Tax

0.43

Correlation Coefficient

Invesco QQQ  Vanguard Tax

Very weak diversification

The 3 months correlation between Invesco and Vanguard is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Invesco QQQ Trust and Vanguard Tax Managed Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Tax Managed and Invesco QQQ 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 QQQ Trust are associated (or correlated) with Vanguard Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Tax Managed has no effect on the direction of Invesco QQQ i.e., Invesco QQQ and Vanguard Tax go up and down completely randomly.

Pair Corralation between Invesco QQQ and Vanguard Tax

Assuming the 90 days trading horizon Invesco QQQ Trust is expected to under-perform the Vanguard Tax. In addition to that, Invesco QQQ is 1.82 times more volatile than Vanguard Tax Managed Funds. It trades about -0.21 of its total potential returns per unit of risk. Vanguard Tax Managed Funds is currently generating about 0.1 per unit of volatility. If you would invest  103,383  in Vanguard Tax Managed Funds on December 2, 2024 and sell it today you would earn a total of  1,037  from holding Vanguard Tax Managed Funds or generate 1.0% return on investment over 90 days.

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

Invesco QQQ Trust  vs.  Vanguard Tax Managed Funds

Invesco QQQ Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco QQQ Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Invesco QQQ is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Tax Managed

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Tax Managed Funds are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Vanguard Tax is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco QQQ and Vanguard Tax

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

The idea behind Invesco QQQ Trust and Vanguard Tax Managed Funds 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.