Correlation Between Avantis Small and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Avantis Small 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 Avantis Small and Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avantis Small Cap and Invesco SP MidCap, you can compare the effects of market volatilities on Avantis Small 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 Avantis Small with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Small and Invesco SP.
Diversification Opportunities for Avantis Small and Invesco SP
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Avantis and Invesco is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Small Cap and Invesco SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP MidCap and Avantis Small 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 Avantis Small Cap 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 MidCap has no effect on the direction of Avantis Small i.e., Avantis Small and Invesco SP go up and down completely randomly.
Pair Corralation between Avantis Small and Invesco SP
Given the investment horizon of 90 days Avantis Small Cap is expected to generate 1.05 times more return on investment than Invesco SP. However, Avantis Small is 1.05 times more volatile than Invesco SP MidCap. It trades about 0.06 of its potential returns per unit of risk. Invesco SP MidCap is currently generating about 0.06 per unit of risk. If you would invest 7,305 in Avantis Small Cap on August 30, 2024 and sell it today you would earn a total of 3,223 from holding Avantis Small Cap or generate 44.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avantis Small Cap vs. Invesco SP MidCap
Performance |
| Timeline |
| Avantis Small Cap |
| Invesco SP MidCap |
Avantis Small and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avantis Small and Invesco SP
The main advantage of trading using opposite Avantis Small and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Small 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.| Avantis Small vs. Dimensional ETF Trust | Avantis Small vs. Vanguard Small Cap Index | Avantis Small vs. First Trust Multi Manager | Avantis Small vs. Vanguard SP Small Cap |
| Invesco SP vs. Invesco SP SmallCap | Invesco SP vs. Invesco SP MidCap | Invesco SP vs. Invesco SP SmallCap | Invesco SP vs. Invesco SP 500 |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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