Correlation Between VanEck Vectors and Invesco SP

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

By analyzing existing cross correlation between VanEck Vectors ETF and Invesco SP MidCap, you can compare the effects of market volatilities on VanEck Vectors and Invesco SP 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 VanEck Vectors with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Vectors and Invesco SP.

Diversification Opportunities for VanEck Vectors and Invesco SP

0.14

Correlation Coefficient

VanEck Vectors  Invesco SP

Average diversification

The 3 months correlation between VanEck and Invesco is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Vectors ETF and Invesco SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP MidCap and VanEck Vectors 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 VanEck Vectors ETF are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP MidCap has no effect on the direction of VanEck Vectors i.e., VanEck Vectors and Invesco SP go up and down completely randomly.

Pair Corralation between VanEck Vectors and Invesco SP

Considering the 90-day investment horizon VanEck Vectors ETF is expected to generate 0.16 times more return on investment than Invesco SP. However, VanEck Vectors ETF is 6.2 times less risky than Invesco SP. It trades about 0.31 of its potential returns per unit of risk. Invesco SP MidCap is currently generating about -0.04 per unit of risk. If you would invest  4,629  in VanEck Vectors ETF on September 12, 2024 and sell it today you would earn a total of  47.00  from holding VanEck Vectors ETF or generate 1.02% return on investment over 90 days.

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

VanEck Vectors ETF  vs.  Invesco SP MidCap

VanEck Vectors ETF

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Vectors ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, VanEck Vectors is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Invesco SP MidCap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP MidCap are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Invesco SP displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VanEck Vectors and Invesco SP

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

The idea behind VanEck Vectors ETF and Invesco SP MidCap 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.