Correlation Between Barclays ETN and Invesco RAFI
Can any of the company-specific risk be diversified away by investing in both Barclays ETN and Invesco RAFI 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 Barclays ETN and Invesco RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barclays ETN Select and Invesco RAFI Strategic, you can compare the effects of market volatilities on Barclays ETN and Invesco RAFI 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 Barclays ETN with a short position of Invesco RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barclays ETN and Invesco RAFI.
Diversification Opportunities for Barclays ETN and Invesco RAFI
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Barclays and Invesco is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Barclays ETN Select and Invesco RAFI Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco RAFI Strategic and Barclays ETN 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 Barclays ETN Select are associated (or correlated) with Invesco RAFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco RAFI Strategic has no effect on the direction of Barclays ETN i.e., Barclays ETN and Invesco RAFI go up and down completely randomly.
Pair Corralation between Barclays ETN and Invesco RAFI
Given the investment horizon of 90 days Barclays ETN Select is expected to generate 1.23 times more return on investment than Invesco RAFI. However, Barclays ETN is 1.23 times more volatile than Invesco RAFI Strategic. It trades about 0.14 of its potential returns per unit of risk. Invesco RAFI Strategic is currently generating about 0.11 per unit of risk. If you would invest 1,738 in Barclays ETN Select on August 31, 2024 and sell it today you would earn a total of 1,271 from holding Barclays ETN Select or generate 73.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Barclays ETN Select vs. Invesco RAFI Strategic
Performance |
| Timeline |
| Barclays ETN Select |
| Invesco RAFI Strategic |
Barclays ETN and Invesco RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barclays ETN and Invesco RAFI
The main advantage of trading using opposite Barclays ETN and Invesco RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays ETN position performs unexpectedly, Invesco RAFI 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 RAFI will offset losses from the drop in Invesco RAFI's long position.| Barclays ETN vs. Alerian Energy Infrastructure | Barclays ETN vs. UBS AG London | Barclays ETN vs. First Trust North | Barclays ETN vs. Tortoise North American |
| Invesco RAFI vs. iShares Core SP | Invesco RAFI vs. iShares Core MSCI | Invesco RAFI vs. iShares Broad USD | Invesco RAFI vs. iShares Core SP |
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 CEOs Directory module to screen CEOs from public companies around the world.
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