Correlation Between Vanguard Index and Invesco CurrencyShares

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

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

Diversification Opportunities for Vanguard Index and Invesco CurrencyShares

0.11

Correlation Coefficient

Vanguard Index  Invesco CurrencyShares

Average diversification

The 3 months correlation between Vanguard and Invesco is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Index Funds and Invesco CurrencyShares Euro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco CurrencyShares and Vanguard Index 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 Index Funds are associated (or correlated) with Invesco CurrencyShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco CurrencyShares has no effect on the direction of Vanguard Index i.e., Vanguard Index and Invesco CurrencyShares go up and down completely randomly.

Pair Corralation between Vanguard Index and Invesco CurrencyShares

Assuming the 90 days trading horizon Vanguard Index Funds is expected to under-perform the Invesco CurrencyShares. In addition to that, Vanguard Index is 19.22 times more volatile than Invesco CurrencyShares Euro. It trades about -0.29 of its total potential returns per unit of risk. Invesco CurrencyShares Euro is currently generating about 0.22 per unit of volatility. If you would invest  195,146  in Invesco CurrencyShares Euro on December 2, 2024 and sell it today you would earn a total of  254.00  from holding Invesco CurrencyShares Euro or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Vanguard Index Funds  vs.  Invesco CurrencyShares Euro

Vanguard Index Funds

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Index Funds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Vanguard Index is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Invesco CurrencyShares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco CurrencyShares Euro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Invesco CurrencyShares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Index and Invesco CurrencyShares

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

The idea behind Vanguard Index Funds and Invesco CurrencyShares Euro 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.