Correlation Between Select STOXX and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Select STOXX 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 Select STOXX and Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select STOXX Europe and Invesco SP Global, you can compare the effects of market volatilities on Select STOXX 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 Select STOXX with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select STOXX and Invesco SP.
Diversification Opportunities for Select STOXX and Invesco SP
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Select and Invesco is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Select STOXX Europe and Invesco SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP Global and Select STOXX 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 Select STOXX Europe 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 Global has no effect on the direction of Select STOXX i.e., Select STOXX and Invesco SP go up and down completely randomly.
Pair Corralation between Select STOXX and Invesco SP
Given the investment horizon of 90 days Select STOXX Europe is expected to generate 1.02 times more return on investment than Invesco SP. However, Select STOXX is 1.02 times more volatile than Invesco SP Global. It trades about 0.44 of its potential returns per unit of risk. Invesco SP Global is currently generating about 0.14 per unit of risk. If you would invest 2,440 in Select STOXX Europe on November 3, 2024 and sell it today you would earn a total of 220.00 from holding Select STOXX Europe or generate 9.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select STOXX Europe vs. Invesco SP Global
Performance |
| Timeline |
| Select STOXX Europe |
| Invesco SP Global |
Select STOXX and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select STOXX and Invesco SP
The main advantage of trading using opposite Select STOXX and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select STOXX 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.| Select STOXX vs. Ultimus Managers Trust | Select STOXX vs. American Beacon Select | Select STOXX vs. First Trust Indxx | Select STOXX vs. Direxion Daily SP |
| Invesco SP vs. First Trust Water | Invesco SP vs. Invesco Global Water | Invesco SP vs. Invesco Water Resources | Invesco SP vs. Consolidated Water Co |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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