Correlation Between SP 500 and Invesco Morningstar

Can any of the company-specific risk be diversified away by investing in both SP 500 and Invesco Morningstar 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 500 and Invesco Morningstar into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for SP 500 and Invesco Morningstar

0.0

Correlation Coefficient

SP 500  Invesco Morningstar

Pay attention - limited upside

The 3 months correlation between VILX and Invesco is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 VIX and Invesco Morningstar Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Morningstar and SP 500 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 500 VIX are associated (or correlated) with Invesco Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Morningstar has no effect on the direction of SP 500 i.e., SP 500 and Invesco Morningstar go up and down completely randomly.

Pair Corralation between SP 500 and Invesco Morningstar

If you would invest  9,481  in Invesco Morningstar Energy on October 9, 2024 and sell it today you would earn a total of  4,079  from holding Invesco Morningstar Energy or generate 43.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.2%
Values	Daily Returns

SP 500 VIX  vs.  Invesco Morningstar Energy

SP 500 VIX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP 500 VIX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SP 500 is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco Morningstar

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Morningstar Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Invesco Morningstar may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SP 500 and Invesco Morningstar

The main advantage of trading using opposite SP 500 and Invesco Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 position performs unexpectedly, Invesco Morningstar 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 Morningstar will offset losses from the drop in Invesco Morningstar's long position.

The idea behind SP 500 VIX and Invesco Morningstar Energy 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.