Correlation Between Global X and Invesco KBW

Can any of the company-specific risk be diversified away by investing in both Global X and Invesco KBW 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 Global X and Invesco KBW into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global X SuperDividend and Invesco KBW Premium, you can compare the effects of market volatilities on Global X and Invesco KBW 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 Global X with a short position of Invesco KBW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Invesco KBW.

Diversification Opportunities for Global X and Invesco KBW

0.77

Correlation Coefficient

Global X  Invesco KBW

Poor diversification

The 3 months correlation between Global and Invesco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Global X SuperDividend and Invesco KBW Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco KBW Premium and Global X 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 Global X SuperDividend are associated (or correlated) with Invesco KBW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco KBW Premium has no effect on the direction of Global X i.e., Global X and Invesco KBW go up and down completely randomly.

Pair Corralation between Global X and Invesco KBW

Given the investment horizon of 90 days Global X SuperDividend is expected to generate 1.07 times more return on investment than Invesco KBW. However, Global X is 1.07 times more volatile than Invesco KBW Premium. It trades about -0.07 of its potential returns per unit of risk. Invesco KBW Premium is currently generating about -0.18 per unit of risk. If you would invest  2,212  in Global X SuperDividend on September 15, 2024 and sell it today you would lose (86.00) from holding Global X SuperDividend or give up 3.89% of portfolio value over 90 days.

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

Global X SuperDividend  vs.  Invesco KBW Premium

Global X SuperDividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X SuperDividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Global X is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Invesco KBW Premium

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Global X and Invesco KBW

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

The idea behind Global X SuperDividend and Invesco KBW Premium 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..