Correlation Between Invesco Exchange and Vanguard Multifactor

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

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

Diversification Opportunities for Invesco Exchange and Vanguard Multifactor

0.84

Correlation Coefficient

Invesco Exchange  Vanguard Multifactor

Very poor diversification

The 3 months correlation between Invesco and Vanguard is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Exchange Traded and Vanguard Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Multifactor and Invesco Exchange 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 Exchange Traded are associated (or correlated) with Vanguard Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Multifactor has no effect on the direction of Invesco Exchange i.e., Invesco Exchange and Vanguard Multifactor go up and down completely randomly.

Pair Corralation between Invesco Exchange and Vanguard Multifactor

Given the investment horizon of 90 days Invesco Exchange Traded is expected to under-perform the Vanguard Multifactor. But the etf apears to be less risky and, when comparing its historical volatility, Invesco Exchange Traded is 1.01 times less risky than Vanguard Multifactor. The etf trades about -0.2 of its potential returns per unit of risk. The Vanguard Multifactor is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  13,953  in Vanguard Multifactor on December 4, 2024 and sell it today you would lose (1,101) from holding Vanguard Multifactor or give up 7.89% of portfolio value over 90 days.

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

Invesco Exchange Traded  vs.  Vanguard Multifactor

Invesco Exchange Traded

Risk-Adjusted Performance

Very Weak

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

Vanguard Multifactor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Multifactor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's primary 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.

Pair Trading with Invesco Exchange and Vanguard Multifactor

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

The idea behind Invesco Exchange Traded and Vanguard Multifactor 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.