Correlation Between Invesco SP and BlackRock Equity

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

Diversification Opportunities for Invesco SP and BlackRock Equity

0.89

Correlation Coefficient

Invesco SP  BlackRock Equity

Very poor diversification

The 3 months correlation between Invesco and BlackRock is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and BlackRock Equity Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Equity Factor 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 BlackRock Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Equity Factor has no effect on the direction of Invesco SP i.e., Invesco SP and BlackRock Equity go up and down completely randomly.

Pair Corralation between Invesco SP and BlackRock Equity

Considering the 90-day investment horizon Invesco SP 500 is expected to generate 0.76 times more return on investment than BlackRock Equity. However, Invesco SP 500 is 1.32 times less risky than BlackRock Equity. It trades about -0.02 of its potential returns per unit of risk. BlackRock Equity Factor is currently generating about -0.08 per unit of risk. If you would invest  17,407  in Invesco SP 500 on December 29, 2024 and sell it today you would lose (227.00) from holding Invesco SP 500 or give up 1.3% 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.  BlackRock Equity Factor

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. Even with relatively invariable basic indicators, Invesco SP is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

BlackRock Equity Factor

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock Equity Factor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BlackRock Equity is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco SP and BlackRock Equity

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

The idea behind Invesco SP 500 and BlackRock Equity Factor 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.