Correlation Between Invesco SPTSX and Invesco Low

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

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

Diversification Opportunities for Invesco SPTSX and Invesco Low

0.97

Correlation Coefficient

Invesco SPTSX  Invesco Low

Almost no diversification

The 3 months correlation between Invesco and Invesco is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SPTSX Composite and Invesco Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Low Volatility and Invesco SPTSX 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 SPTSX Composite are associated (or correlated) with Invesco Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Low Volatility has no effect on the direction of Invesco SPTSX i.e., Invesco SPTSX and Invesco Low go up and down completely randomly.

Pair Corralation between Invesco SPTSX and Invesco Low

Assuming the 90 days trading horizon Invesco SPTSX Composite is expected to generate 1.31 times more return on investment than Invesco Low. However, Invesco SPTSX is 1.31 times more volatile than Invesco Low Volatility. It trades about 0.27 of its potential returns per unit of risk. Invesco Low Volatility is currently generating about 0.23 per unit of risk. If you would invest  3,176  in Invesco SPTSX Composite on September 3, 2024 and sell it today you would earn a total of  232.00  from holding Invesco SPTSX Composite or generate 7.3% return on investment over 90 days.

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

Invesco SPTSX Composite  vs.  Invesco Low Volatility

Invesco SPTSX Composite

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SPTSX Composite are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Invesco SPTSX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco Low Volatility

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Low Volatility are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Invesco Low is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco SPTSX and Invesco Low

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

The idea behind Invesco SPTSX Composite and Invesco Low Volatility 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.