Correlation Between Vanguard Utilities and Invesco DWA

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

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

Diversification Opportunities for Vanguard Utilities and Invesco DWA

-0.05

Correlation Coefficient

Vanguard Utilities  Invesco DWA

Good diversification

The 3 months correlation between Vanguard and Invesco is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Utilities Index and Invesco DWA Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Consumer and Vanguard Utilities 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 Utilities Index are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Consumer has no effect on the direction of Vanguard Utilities i.e., Vanguard Utilities and Invesco DWA go up and down completely randomly.

Pair Corralation between Vanguard Utilities and Invesco DWA

Considering the 90-day investment horizon Vanguard Utilities Index is expected to generate 1.11 times more return on investment than Invesco DWA. However, Vanguard Utilities is 1.11 times more volatile than Invesco DWA Consumer. It trades about -0.22 of its potential returns per unit of risk. Invesco DWA Consumer is currently generating about -0.25 per unit of risk. If you would invest  17,290  in Vanguard Utilities Index on October 6, 2024 and sell it today you would lose (660.00) from holding Vanguard Utilities Index or give up 3.82% of portfolio value over 90 days.

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

Vanguard Utilities Index  vs.  Invesco DWA Consumer

Vanguard Utilities Index

Risk-Adjusted Performance

0 of 100

Very Weak

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

Invesco DWA Consumer

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Consumer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Invesco DWA is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vanguard Utilities and Invesco DWA

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

The idea behind Vanguard Utilities Index and Invesco DWA Consumer 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.