Correlation Between UST Inc and Invesco SP

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

By analyzing existing cross correlation between Multi Units Luxembourg and Invesco SP 500, you can compare the effects of market volatilities on UST Inc and Invesco SP 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 UST Inc with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of UST Inc and Invesco SP.

Diversification Opportunities for UST Inc and Invesco SP

0.91

Correlation Coefficient

UST Inc  Invesco SP

Almost no diversification

The 3 months correlation between UST and Invesco is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Multi Units Luxembourg and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 and UST Inc 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 Multi Units Luxembourg are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of UST Inc i.e., UST Inc and Invesco SP go up and down completely randomly.

Pair Corralation between UST Inc and Invesco SP

Assuming the 90 days trading horizon Multi Units Luxembourg is expected to generate 0.77 times more return on investment than Invesco SP. However, Multi Units Luxembourg is 1.3 times less risky than Invesco SP. It trades about 0.11 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.06 per unit of risk. If you would invest  4,491  in Multi Units Luxembourg on September 28, 2024 and sell it today you would earn a total of  3,820  from holding Multi Units Luxembourg or generate 85.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	65.67%
Values	Daily Returns

Multi Units Luxembourg   vs.  Invesco SP 500

Multi Units Luxembourg

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Units Luxembourg are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UST Inc sustained solid returns over the last few months and may actually be approaching a breakup point.

Invesco SP 500

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with UST Inc and Invesco SP

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

The idea behind Multi Units Luxembourg and Invesco SP 500 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.