Correlation Between Invesco QQQ and Vanguard International

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

Diversification Opportunities for Invesco QQQ and Vanguard International

0.26

Correlation Coefficient

Invesco QQQ  Vanguard International

Modest diversification

The 3 months correlation between Invesco and Vanguard is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Invesco QQQ Trust and Vanguard International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard International has no effect on the direction of Invesco QQQ i.e., Invesco QQQ and Vanguard International go up and down completely randomly.

Pair Corralation between Invesco QQQ and Vanguard International

Assuming the 90 days trading horizon Invesco QQQ Trust is expected to under-perform the Vanguard International. In addition to that, Invesco QQQ is 1.41 times more volatile than Vanguard International Equity. It trades about -0.25 of its total potential returns per unit of risk. Vanguard International Equity is currently generating about 0.07 per unit of volatility. If you would invest  92,000  in Vanguard International Equity on December 5, 2024 and sell it today you would earn a total of  801.00  from holding Vanguard International Equity or generate 0.87% return on investment over 90 days.

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

Invesco QQQ Trust  vs.  Vanguard International Equity

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 International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard International Equity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Vanguard International 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 International

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

The idea behind Invesco QQQ Trust and Vanguard International Equity 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.