Correlation Between Invesco SP and Xtrackers Russell

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

By analyzing existing cross correlation between Invesco SP MidCap and Xtrackers Russell Multifactor, you can compare the effects of market volatilities on Invesco SP and Xtrackers Russell 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 Invesco SP with a short position of Xtrackers Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Xtrackers Russell.

Diversification Opportunities for Invesco SP and Xtrackers Russell

0.94

Correlation Coefficient

Invesco SP  Xtrackers Russell

Almost no diversification

The 3 months correlation between Invesco and Xtrackers is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP MidCap and Xtrackers Russell Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Russell and Invesco SP 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 Invesco SP MidCap are associated (or correlated) with Xtrackers Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Russell has no effect on the direction of Invesco SP i.e., Invesco SP and Xtrackers Russell go up and down completely randomly.

Pair Corralation between Invesco SP and Xtrackers Russell

Given the investment horizon of 90 days Invesco SP MidCap is expected to generate 1.48 times more return on investment than Xtrackers Russell. However, Invesco SP is 1.48 times more volatile than Xtrackers Russell Multifactor. It trades about 0.14 of its potential returns per unit of risk. Xtrackers Russell Multifactor is currently generating about 0.07 per unit of risk. If you would invest  12,052  in Invesco SP MidCap on October 25, 2024 and sell it today you would earn a total of  1,241  from holding Invesco SP MidCap or generate 10.3% return on investment over 90 days.

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

Invesco SP MidCap  vs.  Xtrackers Russell Multifactor

Invesco SP MidCap

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP MidCap are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Xtrackers Russell

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Russell Multifactor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Xtrackers Russell is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Invesco SP and Xtrackers Russell

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

The idea behind Invesco SP MidCap and Xtrackers Russell Multifactor 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..