Correlation Between Invesco SP and YUMY

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

By analyzing existing cross correlation between Invesco SP 500 and YUMY, you can compare the effects of market volatilities on Invesco SP and YUMY 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 YUMY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and YUMY.

Diversification Opportunities for Invesco SP and YUMY

-0.38

Correlation Coefficient

Invesco SP  YUMY

Very good diversification

The 3 months correlation between Invesco and YUMY is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and YUMY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YUMY 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 500 are associated (or correlated) with YUMY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YUMY has no effect on the direction of Invesco SP i.e., Invesco SP and YUMY go up and down completely randomly.

Pair Corralation between Invesco SP and YUMY

If you would invest  4,993  in Invesco SP 500 on September 14, 2024 and sell it today you would earn a total of  589.00  from holding Invesco SP 500 or generate 11.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.61%
Values	Daily Returns

Invesco SP 500  vs.  YUMY

Invesco SP 500

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

YUMY

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Invesco SP and YUMY

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

The idea behind Invesco SP 500 and YUMY 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.