Correlation Between Invesco SP and AdvisorShares Restaurant

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

Diversification Opportunities for Invesco SP and AdvisorShares Restaurant

-0.39

Correlation Coefficient

Invesco SP  AdvisorShares Restaurant

Very good diversification

The 3 months correlation between Invesco and AdvisorShares is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and AdvisorShares Restaurant ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Restaurant 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 AdvisorShares Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Restaurant has no effect on the direction of Invesco SP i.e., Invesco SP and AdvisorShares Restaurant go up and down completely randomly.

Pair Corralation between Invesco SP and AdvisorShares Restaurant

Considering the 90-day investment horizon Invesco SP 500 is expected to generate 0.54 times more return on investment than AdvisorShares Restaurant. However, Invesco SP 500 is 1.84 times less risky than AdvisorShares Restaurant. It trades about -0.22 of its potential returns per unit of risk. AdvisorShares Restaurant ETF is currently generating about -0.16 per unit of risk. If you would invest  3,126  in Invesco SP 500 on September 26, 2024 and sell it today you would lose (99.00) from holding Invesco SP 500 or give up 3.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Invesco SP 500  vs.  AdvisorShares Restaurant ETF

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. In spite of comparatively stable technical indicators, Invesco SP is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

AdvisorShares Restaurant

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Restaurant ETF are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, AdvisorShares Restaurant may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco SP and AdvisorShares Restaurant

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

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