Correlation Between Invesco SP and VanEck Vectors

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

Diversification Opportunities for Invesco SP and VanEck Vectors

0.85

Correlation Coefficient

Invesco SP  VanEck Vectors

Very poor diversification

The 3 months correlation between Invesco and VanEck is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and VanEck Vectors ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors ETF 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 VanEck Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors ETF has no effect on the direction of Invesco SP i.e., Invesco SP and VanEck Vectors go up and down completely randomly.

Pair Corralation between Invesco SP and VanEck Vectors

Considering the 90-day investment horizon Invesco SP 500 is expected to under-perform the VanEck Vectors. But the etf apears to be less risky and, when comparing its historical volatility, Invesco SP 500 is 2.15 times less risky than VanEck Vectors. The etf trades about -0.17 of its potential returns per unit of risk. The VanEck Vectors ETF is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,110  in VanEck Vectors ETF on December 2, 2024 and sell it today you would lose (29.00) from holding VanEck Vectors ETF or give up 1.37% of portfolio value over 90 days.

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

Invesco SP 500  vs.  VanEck Vectors ETF

Invesco SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

VanEck Vectors ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Vectors ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Invesco SP and VanEck Vectors

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

The idea behind Invesco SP 500 and VanEck Vectors ETF 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.