Correlation Between VanEck Low and Invesco Global

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

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

Diversification Opportunities for VanEck Low and Invesco Global

0.24

Correlation Coefficient

VanEck Low  Invesco Global

Modest diversification

The 3 months correlation between VanEck and Invesco is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Low Carbon and Invesco Global Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Global Clean and VanEck Low 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 Low Carbon are associated (or correlated) with Invesco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Global Clean has no effect on the direction of VanEck Low i.e., VanEck Low and Invesco Global go up and down completely randomly.

Pair Corralation between VanEck Low and Invesco Global

Given the investment horizon of 90 days VanEck Low Carbon is expected to generate 0.77 times more return on investment than Invesco Global. However, VanEck Low Carbon is 1.29 times less risky than Invesco Global. It trades about 0.04 of its potential returns per unit of risk. Invesco Global Clean is currently generating about -0.02 per unit of risk. If you would invest  10,031  in VanEck Low Carbon on December 22, 2024 and sell it today you would earn a total of  232.00  from holding VanEck Low Carbon or generate 2.31% return on investment over 90 days.

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

VanEck Low Carbon  vs.  Invesco Global Clean

VanEck Low Carbon

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Low Carbon are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, VanEck Low is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Invesco Global Clean

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Global Clean has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Invesco Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with VanEck Low and Invesco Global

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

The idea behind VanEck Low Carbon and Invesco Global Clean 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.