Correlation Between Invesco Exchange and Financial Select
Can any of the company-specific risk be diversified away by investing in both Invesco Exchange and Financial Select 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 Exchange and Financial Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Exchange Traded and Financial Select Sector, you can compare the effects of market volatilities on Invesco Exchange and Financial Select 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 Exchange with a short position of Financial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Exchange and Financial Select.
Diversification Opportunities for Invesco Exchange and Financial Select
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and Financial is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Exchange Traded and Financial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Select Sector and Invesco Exchange 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 Exchange Traded are associated (or correlated) with Financial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Select Sector has no effect on the direction of Invesco Exchange i.e., Invesco Exchange and Financial Select go up and down completely randomly.
Pair Corralation between Invesco Exchange and Financial Select
Given the investment horizon of 90 days Invesco Exchange is expected to generate 2.12 times less return on investment than Financial Select. But when comparing it to its historical volatility, Invesco Exchange Traded is 2.1 times less risky than Financial Select. It trades about 0.26 of its potential returns per unit of risk. Financial Select Sector is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 4,663 in Financial Select Sector on August 26, 2024 and sell it today you would earn a total of 410.00 from holding Financial Select Sector or generate 8.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Exchange Traded vs. Financial Select Sector
Performance |
| Timeline |
| Invesco Exchange Traded |
| Financial Select Sector |
Invesco Exchange and Financial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Exchange and Financial Select
The main advantage of trading using opposite Invesco Exchange and Financial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Exchange position performs unexpectedly, Financial Select 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 Financial Select will offset losses from the drop in Financial Select's long position.| Invesco Exchange vs. iShares Russell Mid Cap | Invesco Exchange vs. SPDR SP 400 | Invesco Exchange vs. Invesco High Yield | Invesco Exchange vs. SPDR Russell 1000 |
| Financial Select vs. Energy Select Sector | Financial Select vs. Technology Select Sector | Financial Select vs. Health Care Select | Financial Select vs. Industrial Select Sector |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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