Correlation Between Vanguard STAR and Invesco CurrencyShares

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

Diversification Opportunities for Vanguard STAR and Invesco CurrencyShares

0.71

Correlation Coefficient

Vanguard STAR  Invesco CurrencyShares

Poor diversification

The 3 months correlation between Vanguard and Invesco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard STAR Funds and Invesco CurrencyShares Japanes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco CurrencyShares and Vanguard STAR 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 STAR 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 STAR i.e., Vanguard STAR and Invesco CurrencyShares go up and down completely randomly.

Pair Corralation between Vanguard STAR and Invesco CurrencyShares

Assuming the 90 days trading horizon Vanguard STAR Funds is expected to generate 9.83 times more return on investment than Invesco CurrencyShares. However, Vanguard STAR is 9.83 times more volatile than Invesco CurrencyShares Japanese. It trades about 0.08 of its potential returns per unit of risk. Invesco CurrencyShares Japanese is currently generating about 0.18 per unit of risk. If you would invest  119,833  in Vanguard STAR Funds on December 30, 2024 and sell it today you would earn a total of  8,833  from holding Vanguard STAR Funds or generate 7.37% return on investment over 90 days.

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

Vanguard STAR Funds  vs.  Invesco CurrencyShares Japanes

Vanguard STAR Funds

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard STAR Funds are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Vanguard STAR may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Invesco CurrencyShares

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco CurrencyShares Japanese are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic 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 STAR and Invesco CurrencyShares

The main advantage of trading using opposite Vanguard STAR and Invesco CurrencyShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard STAR 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 STAR Funds and Invesco CurrencyShares Japanese 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.