Correlation Between InfraCap MLP and Invesco SP
Can any of the company-specific risk be diversified away by investing in both InfraCap MLP and Invesco SP 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 InfraCap MLP and Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between InfraCap MLP ETF and Invesco SP 500, you can compare the effects of market volatilities on InfraCap MLP and Invesco SP 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 InfraCap MLP with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of InfraCap MLP and Invesco SP.
Diversification Opportunities for InfraCap MLP and Invesco SP
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between InfraCap and Invesco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding InfraCap MLP ETF and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 and InfraCap MLP 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 InfraCap MLP ETF are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of InfraCap MLP i.e., InfraCap MLP and Invesco SP go up and down completely randomly.
Pair Corralation between InfraCap MLP and Invesco SP
Given the investment horizon of 90 days InfraCap MLP ETF is expected to generate 1.25 times more return on investment than Invesco SP. However, InfraCap MLP is 1.25 times more volatile than Invesco SP 500. It trades about 0.11 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.07 per unit of risk. If you would invest 3,001 in InfraCap MLP ETF on August 26, 2024 and sell it today you would earn a total of 1,544 from holding InfraCap MLP ETF or generate 51.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
InfraCap MLP ETF vs. Invesco SP 500
Performance |
| Timeline |
| InfraCap MLP ETF |
| Invesco SP 500 |
InfraCap MLP and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InfraCap MLP and Invesco SP
The main advantage of trading using opposite InfraCap MLP and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InfraCap MLP position performs unexpectedly, Invesco SP 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 SP will offset losses from the drop in Invesco SP's long position.| InfraCap MLP vs. Virtus InfraCap Preferred | InfraCap MLP vs. Global X MLP | InfraCap MLP vs. Amplify High Income | InfraCap MLP vs. Alerian MLP ETF |
| Invesco SP vs. Invesco SP 500 | Invesco SP vs. Invesco SP SmallCap | Invesco SP vs. Invesco SP MidCap | Invesco SP vs. Invesco SP MidCap |
Check out your portfolio center.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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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