Correlation Between SP 500 and Invesco Technology

Can any of the company-specific risk be diversified away by investing in both SP 500 and Invesco Technology 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 Technology 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 Technology SP, you can compare the effects of market volatilities on SP 500 and Invesco Technology 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 Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and Invesco Technology.

Diversification Opportunities for SP 500 and Invesco Technology

-0.69

Correlation Coefficient

SP 500  Invesco Technology

Excellent diversification

The 3 months correlation between VILX and Invesco is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 VIX and Invesco Technology SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Technology 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 Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Technology has no effect on the direction of SP 500 i.e., SP 500 and Invesco Technology go up and down completely randomly.

Pair Corralation between SP 500 and Invesco Technology

Assuming the 90 days trading horizon SP 500 VIX is expected to generate 13.42 times more return on investment than Invesco Technology. However, SP 500 is 13.42 times more volatile than Invesco Technology SP. It trades about 0.05 of its potential returns per unit of risk. Invesco Technology SP is currently generating about 0.13 per unit of risk. If you would invest  215,106  in SP 500 VIX on September 22, 2024 and sell it today you would earn a total of  3,843  from holding SP 500 VIX or generate 1.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

SP 500 VIX  vs.  Invesco Technology SP

SP 500 VIX

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SP 500 VIX are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SP 500 unveiled solid returns over the last few months and may actually be approaching a breakup point.

Invesco Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Technology SP are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Invesco Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SP 500 and Invesco Technology

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

The idea behind SP 500 VIX and Invesco Technology SP 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.