Correlation Between Invesco SP and 35137LAJ4

Can any of the company-specific risk be diversified away by investing in both Invesco SP and 35137LAJ4 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 35137LAJ4 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 FOX P, you can compare the effects of market volatilities on Invesco SP and 35137LAJ4 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 35137LAJ4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and 35137LAJ4.

Diversification Opportunities for Invesco SP and 35137LAJ4

-0.45

Correlation Coefficient

Invesco SP  35137LAJ4

Very good diversification

The 3 months correlation between Invesco and 35137LAJ4 is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and FOX P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 35137LAJ4 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 35137LAJ4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 35137LAJ4 has no effect on the direction of Invesco SP i.e., Invesco SP and 35137LAJ4 go up and down completely randomly.

Pair Corralation between Invesco SP and 35137LAJ4

Considering the 90-day investment horizon Invesco SP is expected to generate 46.56 times less return on investment than 35137LAJ4. But when comparing it to its historical volatility, Invesco SP 500 is 58.99 times less risky than 35137LAJ4. It trades about 0.07 of its potential returns per unit of risk. FOX P is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9,252  in FOX P on September 24, 2024 and sell it today you would earn a total of  14.00  from holding FOX P or generate 0.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.99%
Values	Daily Returns

Invesco SP 500  vs.  FOX P

Invesco SP 500

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

35137LAJ4

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FOX P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for FOX P investors.

Pair Trading with Invesco SP and 35137LAJ4

The main advantage of trading using opposite Invesco SP and 35137LAJ4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, 35137LAJ4 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 35137LAJ4 will offset losses from the drop in 35137LAJ4's long position.

The idea behind Invesco SP 500 and FOX P 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.