Correlation Between WBI BullBear and Invesco KBW

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

By analyzing existing cross correlation between WBI BullBear Value and Invesco KBW High, you can compare the effects of market volatilities on WBI BullBear and Invesco KBW 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 WBI BullBear with a short position of Invesco KBW. Check out your portfolio center. Please also check ongoing floating volatility patterns of WBI BullBear and Invesco KBW.

Diversification Opportunities for WBI BullBear and Invesco KBW

0.78

Correlation Coefficient

WBI BullBear  Invesco KBW

Poor diversification

The 3 months correlation between WBI and Invesco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding WBI BullBear Value and Invesco KBW High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco KBW High and WBI BullBear 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 WBI BullBear Value are associated (or correlated) with Invesco KBW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco KBW High has no effect on the direction of WBI BullBear i.e., WBI BullBear and Invesco KBW go up and down completely randomly.

Pair Corralation between WBI BullBear and Invesco KBW

Given the investment horizon of 90 days WBI BullBear Value is expected to under-perform the Invesco KBW. But the etf apears to be less risky and, when comparing its historical volatility, WBI BullBear Value is 1.18 times less risky than Invesco KBW. The etf trades about -0.04 of its potential returns per unit of risk. The Invesco KBW High is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,446  in Invesco KBW High on October 8, 2024 and sell it today you would earn a total of  44.00  from holding Invesco KBW High or generate 3.04% return on investment over 90 days.

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

WBI BullBear Value  vs.  Invesco KBW High

WBI BullBear Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WBI BullBear Value has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, WBI BullBear is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Invesco KBW High

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco KBW High are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Invesco KBW is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WBI BullBear and Invesco KBW

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

The idea behind WBI BullBear Value and Invesco KBW High 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.