Correlation Between Invesco SP and Consumer Staples

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

Diversification Opportunities for Invesco SP and Consumer Staples

0.27

Correlation Coefficient

Invesco SP  Consumer Staples

Modest diversification

The 3 months correlation between Invesco and Consumer is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and Consumer Staples Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Staples Select 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 Consumer Staples. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Staples Select has no effect on the direction of Invesco SP i.e., Invesco SP and Consumer Staples go up and down completely randomly.

Pair Corralation between Invesco SP and Consumer Staples

Considering the 90-day investment horizon Invesco SP 500 is expected to generate 1.56 times more return on investment than Consumer Staples. However, Invesco SP is 1.56 times more volatile than Consumer Staples Select. It trades about 0.0 of its potential returns per unit of risk. Consumer Staples Select is currently generating about -0.1 per unit of risk. If you would invest  5,105  in Invesco SP 500 on September 30, 2024 and sell it today you would lose (26.00) from holding Invesco SP 500 or give up 0.51% of portfolio value over 90 days.

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

Invesco SP 500  vs.  Consumer Staples Select

Invesco SP 500

Risk-Adjusted Performance

0 of 100

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 fairly strong technical and fundamental indicators, Invesco SP is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Consumer Staples Select

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consumer Staples Select has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Consumer Staples is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Invesco SP and Consumer Staples

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

The idea behind Invesco SP 500 and Consumer Staples Select 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.