Correlation Between Invesco SP and Formidable Fortress

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

Diversification Opportunities for Invesco SP and Formidable Fortress

0.6

Correlation Coefficient

Invesco SP  Formidable Fortress

Poor diversification

The 3 months correlation between Invesco and Formidable is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and Formidable Fortress ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formidable Fortress ETF 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 Formidable Fortress. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formidable Fortress ETF has no effect on the direction of Invesco SP i.e., Invesco SP and Formidable Fortress go up and down completely randomly.

Pair Corralation between Invesco SP and Formidable Fortress

Given the investment horizon of 90 days Invesco SP 500 is expected to generate 1.34 times more return on investment than Formidable Fortress. However, Invesco SP is 1.34 times more volatile than Formidable Fortress ETF. It trades about -0.17 of its potential returns per unit of risk. Formidable Fortress ETF is currently generating about -0.47 per unit of risk. If you would invest  6,906  in Invesco SP 500 on October 5, 2024 and sell it today you would lose (203.00) from holding Invesco SP 500 or give up 2.94% of portfolio value over 90 days.

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

Invesco SP 500  vs.  Formidable Fortress ETF

Invesco SP 500

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical 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.

Formidable Fortress ETF

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Invesco SP and Formidable Fortress

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

The idea behind Invesco SP 500 and Formidable Fortress ETF 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.