Correlation Between Invesco SP and PBND

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

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

Diversification Opportunities for Invesco SP and PBND

-0.55

Correlation Coefficient

Invesco SP  PBND

Excellent diversification

The 3 months correlation between Invesco and PBND is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP MidCap and PBND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBND 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 MidCap are associated (or correlated) with PBND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBND has no effect on the direction of Invesco SP i.e., Invesco SP and PBND go up and down completely randomly.

Pair Corralation between Invesco SP and PBND

If you would invest  11,445  in Invesco SP MidCap on September 14, 2024 and sell it today you would earn a total of  1,246  from holding Invesco SP MidCap or generate 10.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Invesco SP MidCap  vs.  PBND

Invesco SP MidCap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP MidCap are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PBND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PBND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PBND is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco SP and PBND

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

The idea behind Invesco SP MidCap and PBND 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.