Correlation Between Vanguard Total and Invesco Agriculture

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

Diversification Opportunities for Vanguard Total and Invesco Agriculture

0.66

Correlation Coefficient

Vanguard Total  Invesco Agriculture

Poor diversification

The 3 months correlation between Vanguard and Invesco is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Invesco Agriculture Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Agriculture 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 Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Agriculture has no effect on the direction of Vanguard Total i.e., Vanguard Total and Invesco Agriculture go up and down completely randomly.

Pair Corralation between Vanguard Total and Invesco Agriculture

Considering the 90-day investment horizon Vanguard Total is expected to generate 1.02 times less return on investment than Invesco Agriculture. But when comparing it to its historical volatility, Vanguard Total Stock is 1.12 times less risky than Invesco Agriculture. It trades about 0.1 of its potential returns per unit of risk. Invesco Agriculture Commodity is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,374  in Invesco Agriculture Commodity on October 4, 2024 and sell it today you would earn a total of  1,170  from holding Invesco Agriculture Commodity or generate 49.28% return on investment over 90 days.

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

Vanguard Total Stock  vs.  Invesco Agriculture Commodity

Vanguard Total Stock

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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 Agriculture

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Agriculture Commodity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Invesco Agriculture may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vanguard Total and Invesco Agriculture

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

The idea behind Vanguard Total Stock and Invesco Agriculture Commodity 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.