Correlation Between Sp Midcap and Invesco Technology

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

By analyzing existing cross correlation between Sp Midcap Index and Invesco Technology Fund, you can compare the effects of market volatilities on Sp Midcap and Invesco Technology 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 Sp Midcap with a short position of Invesco Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Midcap and Invesco Technology.

Diversification Opportunities for Sp Midcap and Invesco Technology

0.25

Correlation Coefficient

Sp Midcap  Invesco Technology

Modest diversification

The 3 months correlation between SPMIX and Invesco is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sp Midcap Index and Invesco Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Technology and Sp Midcap 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 Sp Midcap Index are associated (or correlated) with Invesco Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Technology has no effect on the direction of Sp Midcap i.e., Sp Midcap and Invesco Technology go up and down completely randomly.

Pair Corralation between Sp Midcap and Invesco Technology

Assuming the 90 days horizon Sp Midcap Index is expected to under-perform the Invesco Technology. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sp Midcap Index is 1.24 times less risky than Invesco Technology. The mutual fund trades about -0.26 of its potential returns per unit of risk. The Invesco Technology Fund is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  7,198  in Invesco Technology Fund on September 20, 2024 and sell it today you would lose (711.00) from holding Invesco Technology Fund or give up 9.88% of portfolio value over 90 days.

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

Sp Midcap Index  vs.  Invesco Technology Fund

Sp Midcap Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sp Midcap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Invesco Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Technology Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Invesco Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sp Midcap and Invesco Technology

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

The idea behind Sp Midcap Index and Invesco Technology Fund 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.