Correlation Between Invesco QQQ and Vanguard

Can any of the company-specific risk be diversified away by investing in both Invesco QQQ and Vanguard 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 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 SP 500, you can compare the effects of market volatilities on Invesco QQQ and Vanguard 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco QQQ and Vanguard.

Diversification Opportunities for Invesco QQQ and Vanguard

0.98

Correlation Coefficient

Invesco QQQ  Vanguard

Almost no diversification

The 3 months correlation between Invesco and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Invesco QQQ Trust and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Invesco QQQ i.e., Invesco QQQ and Vanguard go up and down completely randomly.

Pair Corralation between Invesco QQQ and Vanguard

Assuming the 90 days trading horizon Invesco QQQ Trust is expected to under-perform the Vanguard. In addition to that, Invesco QQQ is 1.19 times more volatile than Vanguard SP 500. It trades about -0.13 of its total potential returns per unit of risk. Vanguard SP 500 is currently generating about -0.1 per unit of volatility. If you would invest  1,116,609  in Vanguard SP 500 on December 30, 2024 and sell it today you would lose (75,588) from holding Vanguard SP 500 or give up 6.77% of portfolio value over 90 days.

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

Invesco QQQ Trust  vs.  Vanguard SP 500

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 latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Vanguard SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Invesco QQQ and Vanguard

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

The idea behind Invesco QQQ Trust and Vanguard SP 500 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.