Correlation Between Vanguard Value and Invesco Exchange

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

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

Diversification Opportunities for Vanguard Value and Invesco Exchange

0.97

Correlation Coefficient

Vanguard Value  Invesco Exchange

Almost no diversification

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

Pair Corralation between Vanguard Value and Invesco Exchange

Given the investment horizon of 90 days Vanguard Value Factor is expected to generate 0.94 times more return on investment than Invesco Exchange. However, Vanguard Value Factor is 1.07 times less risky than Invesco Exchange. It trades about -0.04 of its potential returns per unit of risk. Invesco Exchange Traded is currently generating about -0.08 per unit of risk. If you would invest  11,807  in Vanguard Value Factor on December 23, 2024 and sell it today you would lose (276.00) from holding Vanguard Value Factor or give up 2.34% of portfolio value over 90 days.

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

Vanguard Value Factor  vs.  Invesco Exchange Traded

Vanguard Value Factor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Value Factor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Exchange Traded

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Invesco Exchange is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Value and Invesco Exchange

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

The idea behind Vanguard Value Factor and Invesco Exchange Traded 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.