Correlation Between Vanguard Total and Invesco Exchange

Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Total 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 Total Stock and Invesco Exchange Traded, you can compare the effects of market volatilities on Vanguard Total 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 Total with a short position of Invesco Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Invesco Exchange.

Diversification Opportunities for Vanguard Total and Invesco Exchange

0.18

Correlation Coefficient

Vanguard Total  Invesco Exchange

Average diversification

The 3 months correlation between Vanguard and Invesco is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock 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 Total 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 Total Stock 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 Total i.e., Vanguard Total and Invesco Exchange go up and down completely randomly.

Pair Corralation between Vanguard Total and Invesco Exchange

Considering the 90-day investment horizon Vanguard Total Stock is expected to under-perform the Invesco Exchange. In addition to that, Vanguard Total is 1.45 times more volatile than Invesco Exchange Traded. It trades about -0.09 of its total potential returns per unit of risk. Invesco Exchange Traded is currently generating about 0.08 per unit of volatility. If you would invest  3,001  in Invesco Exchange Traded on December 30, 2024 and sell it today you would earn a total of  99.00  from holding Invesco Exchange Traded or generate 3.3% return on investment over 90 days.

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

Vanguard Total Stock  vs.  Invesco Exchange Traded

Vanguard Total Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Total Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Invesco Exchange Traded

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Exchange Traded are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Invesco Exchange is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Total and Invesco Exchange

The main advantage of trading using opposite Vanguard Total and Invesco Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Total Stock 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.