Correlation Between Vanguard Emerging and Invesco European

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

By analyzing existing cross correlation between Vanguard Emerging Markets and Invesco European Growth, you can compare the effects of market volatilities on Vanguard Emerging and Invesco European 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 Vanguard Emerging with a short position of Invesco European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Emerging and Invesco European.

Diversification Opportunities for Vanguard Emerging and Invesco European

0.83

Correlation Coefficient

Vanguard Emerging  Invesco European

Very poor diversification

The 3 months correlation between Vanguard and Invesco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets and Invesco European Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco European Growth and Vanguard Emerging 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 Vanguard Emerging Markets are associated (or correlated) with Invesco European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco European Growth has no effect on the direction of Vanguard Emerging i.e., Vanguard Emerging and Invesco European go up and down completely randomly.

Pair Corralation between Vanguard Emerging and Invesco European

Assuming the 90 days horizon Vanguard Emerging is expected to generate 2.51 times less return on investment than Invesco European. In addition to that, Vanguard Emerging is 1.04 times more volatile than Invesco European Growth. It trades about 0.04 of its total potential returns per unit of risk. Invesco European Growth is currently generating about 0.11 per unit of volatility. If you would invest  3,139  in Invesco European Growth on December 30, 2024 and sell it today you would earn a total of  195.00  from holding Invesco European Growth or generate 6.21% return on investment over 90 days.

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

Vanguard Emerging Markets  vs.  Invesco European Growth

Vanguard Emerging Markets

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Emerging Markets are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco European Growth

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco European Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco European may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vanguard Emerging and Invesco European

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

The idea behind Vanguard Emerging Markets and Invesco European Growth 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.