Correlation Between Invesco SP and SPACE

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

Diversification Opportunities for Invesco SP and SPACE

0.59

Correlation Coefficient

Invesco SP  SPACE

Very weak diversification

The 3 months correlation between Invesco and SPACE is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and SPACE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPACE 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 SPACE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPACE has no effect on the direction of Invesco SP i.e., Invesco SP and SPACE go up and down completely randomly.

Pair Corralation between Invesco SP and SPACE

Given the investment horizon of 90 days Invesco SP 500 is expected to generate 0.11 times more return on investment than SPACE. However, Invesco SP 500 is 9.3 times less risky than SPACE. It trades about 0.09 of its potential returns per unit of risk. SPACE is currently generating about -0.02 per unit of risk. If you would invest  6,074  in Invesco SP 500 on October 5, 2024 and sell it today you would earn a total of  927.00  from holding Invesco SP 500 or generate 15.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	63.06%
Values	Daily Returns

Invesco SP 500  vs.  SPACE

Invesco SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Invesco SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SPACE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco SP and SPACE

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

The idea behind Invesco SP 500 and SPACE 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.